Question

Plato writes, "The natural advantages which one country has over another, in producing particular commodities, are sometimes so great, that it is acknowledged by all the world to be in vain to struggle with them."

A TRUE
B FALSE

Answer 1

The quote is falsely attributed to Plato, as the concepts of absolute and comparative advantage were not discussed until much later by economists. Absolute and comparative advantage explain why countries trade certain goods based on factors such as natural resources, geography, and opportunity cost.

Step-by-step explanation:

The quote attributed to Plato is False. Though Plato did discuss various topics regarding society and trade in his works, the concept of absolute and comparative advantage as we know them relate to the work of later economists. When discussing trade and productivity between countries, two key concepts are absolute advantage and comparative advantage.

Absolute advantage occurs when a country can produce a good using fewer resources than another country. This is often due to natural resources or geographical advantages. For instance, Saudi Arabia's oil production is easier due to its natural oil reserves. Similarly, the United States has fertile farmland ideal for growing crops like corn and wheat. Guatemala and Colombia have climates favorable for coffee cultivation, while Chile and Zambia possess rich copper mines.

However, the possibility of trade does not rely only on absolute advantage; comparative advantage also plays a crucial role. Comparative advantage occurs when a country can produce a good at a lower opportunity cost than another, even if it doesn't have the absolute advantage. This concept forms the basis for trade, as countries will benefit from specializing in the production where they hold a comparative advantage and engaging in trade with others.