[amp_mcq option1=”Equal” option2=”Comparative” option3=”Absolute” option4=”All of these” correct=”option4″]<\/p>\n
The correct answer is: D. All of these<\/strong><\/p>\n International trade takes place when countries have different comparative advantages. A comparative advantage is a country’s ability to produce a good or service at a lower opportunity cost than another country. When countries have different comparative advantages, they can trade with each other and both countries will benefit.<\/p>\n If countries have equal costs, there is no comparative advantage and there will be no trade. If countries have absolute advantages, they can produce all goods at a lower cost than other countries. In this case, there is no need to trade and countries will produce all goods for themselves.<\/p>\n Therefore, international trade would not take place under any of the cost differences mentioned in the question.<\/p>\n Here is a more detailed explanation of each option:<\/p>\n It is important to note that comparative advantage is not the same as absolute advantage. A country can have a comparative advantage in a good even if it does not have an absolute advantage in that good. For example, let’s say that Country A can produce wheat at a cost of $1 per bushel, and Country B can produce wheat at a cost of $0.50 per bushel. In this case, Country B has an absolute advantage in wheat production. However, Country A may still have a comparative advantage in wheat production if it has a lower opportunity cost of producing wheat than Country B. For example, let’s say that Country A can produce cloth at a cost of $2 per yard, and Country B can produce cloth at a cost of $1 per yard. In this case, Country A has a comparative advantage in cloth production, even though it does not have an absolute advantage in cloth production.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”Equal” option2=”Comparative” option3=”Absolute” option4=”All of these” correct=”option4″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[952],"tags":[],"class_list":["post-43602","post","type-post","status-publish","format-standard","hentry","category-costing","no-featured-image-padding"],"yoast_head":"\n\n