comparative advantage
comparative advantageLower opportunity costs than other countries. A country has a comparative advantage in producing a good, relative to another country or the rest of the world, if the relative cost of producing the good, that is, its opportunity cost in terms of other goods foregone, is lower than it is abroad. The law or theory of comparative advantage can be interpreted in either a positive or a normative sense. In its positive sense the law says that countries tend to export goods in which they have a comparative advantage and to import goods in which they have a comparative disadvantage. As real world trade is affected by tariffs, subsidies, and monopoly this is an empirical generalization, not a logical necessity. In its normative sense the theory of comparative advantage says that it is beneficial both for a country and for the world as a whole if trade follows the lines it suggests.
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