Explain the principle of comparative advantage in nontechnical terms.

What will be an ideal response?

If two nations do not have identical costs of production, then each nation should specialize in production of the good or goods which it can produce at the relatively lower cost. The key term is “relative” since one nation may be able to produce everything at an absolutely lower cost.
It is sometimes easier to explain in terms of individuals. If a doctor is a very good house painter, and can paint her house twice as fast as any professional painter, this does not mean she should paint her own house from the standpoint of comparative advantage. A doctor’s time is worth substantially more than a painter’s time, so from a relative standpoint, it makes sense to hire the painter to paint the house even if it takes him twice as long as the doctor. The doctor stands to gain economically by practicing medicine during the time it would take her to paint the house.

Economics

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Suppose the money supply is set to grow at 7%, real GDP grows at 5%, and the expected real interest rate on Aaa corporate bonds averages 6%

Using the quantity theory of money and the Fisher equation, the nominal interest rate on the Aaa corporate bond should be A) -2%. B) 2%. C) 6%. D) 8%.

Economics

In 2002, government expenditures as a percentage of GDP were lowest for which country?

a. Sweden b. United States c. Germany d. France

Economics