Economics • Economic BasicsMedium
Which of the following defines 'Comparative Advantage' as propounded by David Ricardo?
A. The ability of a country to produce a particular good at a lower opportunity cost than its trading partners.✓ Correct Answer
B. The ability of an entity to produce more of a given product using fewer total resources than anyone else.
C. The market condition where two nations impose equal tariff barriers against each other.
D. The phenomenon where domestic industries outperform foreign rivals due to government subsidies.
💡 Solution & Explanation
David Ricardo formulated the theory of comparative advantage to demonstrate that international trade benefits all participating countries when they specialize in producing goods where they hold the lowest opportunity cost. This concept refutes absolute advantage by showing that trade remains mutually advantageous even if one nation is less efficient in producing all commodities.
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