Final answer:
The idea behind comparative advantage indicates that one party may be able to produce something at a lower opportunity cost than another. This principle guides international trade by advocating for countries to specialize and trade in goods where they have a comparative advantage, leading to greater efficiency and mutual benefits.
Step-by-step explanation:
The idea behind comparative advantage reflects the possibility that one party may be able to produce something at a lower opportunity cost than another party. This concept is pivotal in the field of international trade and economics. It stipulates that even if one country has an absolute advantage in producing all goods, trade can still benefit both countries if they specialize in goods for which they have a comparative advantage.
Comparative advantage is not about producing at a lower dollar cost but rather at a lower opportunity cost, which means foregoing less of other goods to produce a specific good. In practical terms, if a country like Zambia uses its resources to produce copper, its opportunity cost is the other goods it cannot produce, like corn. So, if it is cheaper for Zambia in terms of opportunity cost to produce copper rather than corn, it has a comparative advantage in copper. Meanwhile, another country that can afford to give up less to produce corn would have a comparative advantage in corn.
A real-world example of this is when the United States chooses to specialize in the production of refrigerators, which it has a comparative advantage in, and trades with other countries for goods like shoes, which the United States maybe doesn't have a comparative advantage in. This specialization and trade based on comparative advantages can lead to increased global production and higher levels of consumption for all participating countries.