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JAMB Economics 1989 Question 41

Question 41

International Trade

The law of comparative advantage states that a country should specialise in the production of a commodity

  1. A.for which local demand is greatest
  2. B.in which its opportunity cost is lower than that of the trade partner
  3. C.for which foreign demand is greatest
  4. D.for which there is abundant supply of raw materials.
Show the answer and explanation

Answer: B (in which its opportunity cost is lower than that of the trade partner)

Explanation

Comparative advantage means producing the good you can make at a lower opportunity cost than your trading partner.