What would cause a nation to lose its comparative (or competitive) advantage?
What will be an ideal response?
In many nations, governments focus on improving the nation's resources–natural resources, labor, capital (plant, equipment, and infrastructure), technology, and innovation and entrepreneurialism–to improve competitiveness. If a nation has lost its comparative (or competitive) advantage, then it probably failed in one or more of these areas. Alternatively, the foreign competition (companies or nations) may have simply done a better job of improving in one or more of these areas. Remember, comparative advantage is really a relative advantage–relative to the competition.
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