Multiple Choice
As flat screen TVs enter the maturity stage of their product life cycle, which of the following is most likely to be a source of comparative advantage for producers?
99
views
9. International Trade
Sources of Comparative Advantage
Multiple Choice
Which of the following is a source of comparative advantage in international trade?
A
Uniform resource endowments in all countries
B
Differences in technology between countries
C
Equal productivity levels in all industries
D
Identical opportunity costs across countries
Verified step by step guidance1
Understand the concept of comparative advantage: it arises when a country can produce a good at a lower opportunity cost compared to another country.
Analyze each option by considering whether it leads to differences in opportunity costs between countries, which is essential for comparative advantage.
Recognize that 'Uniform resource endowments in all countries' implies similar resources everywhere, which would not create differences in opportunity costs.
Note that 'Equal productivity levels in all industries' and 'Identical opportunity costs across countries' mean no country has a lower opportunity cost, so no comparative advantage exists.
Identify that 'Differences in technology between countries' cause variations in productivity and opportunity costs, thus creating the basis for comparative advantage in international trade.
Related Videos
Related Practice
