Comparative Advantage-Part 3

Research

Comparative advantage provides a powerful explanation for the advantages of specialization in production. Even in extreme cases where individuals have an absolute advantage in two activities or occupations they will be better off specializing in that activity or occupation for which they are relatively better. This is the activity or occupation for which they have a comparative advantage. Mutually beneficial trade occurs between two individuals when each specializes in the activity or occupation for which he or she has a comparative advantage, or the area for which the opportunity cost of their effort is less. The same logic may be applied to groups of individuals or nations. For example, comparative advantage explains the pattern of trade between two nations: mutually beneficial trade occurs between two nations when each specializes in the production and export of the product for which it is the lower opportunity cost producer, and imports the product for which it has a higher opportunity cost. In other words, a nation will tend to export goods to another nation for which it has a comparative advantage and will import goods for which it has a comparative disadvantage.

Quiz

In the activities are assignments which could be used as assessment tools outside of the Web. Some of the work of students at web conferences could also be used to assess students. Have students take this quiz for further assessment.