Question

With reference to international political economy, can you identify the following concepts and terms, or provide the required answer: comparative advantage

a. The idea that each country should produce all the goods and services it needs domestically.
b. A policy promoting economic self-sufficiency.
c. The ability of a country to produce a good or service at a lower opportunity cost than another country.
d. A trade policy advocating for high tariffs and protectionist measures.

Answer 1

Comparative advantage is the ability of a country to produce a good or service at a lower opportunity cost than another country. It promotes trade and specialization, leading to increased global production and consumption.

Step-by-step explanation:

The concept being described is comparative advantage. It refers to the ability of a country to produce a good or service at a lower opportunity cost than another country. This means that a country can produce a good more efficiently than another country, allowing it to specialize in the production of that particular good and trade with other countries.

For example, let's say Country A can produce 10 cars or 20 shirts with the same amount of resources, while Country B can produce 10 cars or 5 shirts. Country A has a comparative advantage in shirts because it can produce more shirts at a lower opportunity cost (1 car for 2 shirts) compared to Country B (1 car for 0.5 shirt).

This theory promotes international trade and specialization, as each country focuses on producing goods in which it has a comparative advantage and trades them with other countries, leading to increased global production and higher levels of consumption for all.