I'm sorry to pollute this intellectual discussion with something as simple as a college level economics problem, but it is one I truly cannot grasp. Any help would be greatly appriciated. It is as follows: A country will have a comparative advantage in the production of a good if the domestic quantity a. supplied is positive at the world price. b. demanded is positive at the world price. c. supplied is greater than the domestic quantity demanded at the world price. d. supplied is less than the domestic quantity demanded at the world price. I am leaning towards answer a, since the domestic quantity would be positive at the world price line, indicating a comparartive advantage. I'm not positive of my reasoning, however, and was curious if anyone understood this principle better than I do. Thanks.
Sounds like a question in search of context. When you talk about positive in "...domestic quantity supplied is positive at the world price" or "...domestic quantity demanded is positive at the world price", what do you mean? For example, does positive at the world price mean more expensive or more competitive? Define "positive" in the context of the question.
To my knowledge a nation will have a comparative advantage if its Oppurtunity costs are lower then the nation which it is trading with. So it has nothing to do with demand, it has more to do with economic tradeoffs so it has to deal with supply, I would wager that supplied is positive at the world price. may be right...not sure.
Disclaimer: It’s been 2 decades since I took an economics class. A country has a comparative advantage in the production of a good if it is exporting it. It can’t be a or b, since the answer must factor in both domestic supply and domestic demand. So the answer is c, because only then do you have excess supply to sell to foreign markets. Please let us know which answer turns out correct.
Comparitive advantage is when Country A produces product X with greater efficiency then Country B. This means that the cost per unit of product X in country A is less then in Country B. How ever this doesn't mean that country A can produce a greater quantity then B. (As you are only comparing the two countries and their opportunity cost of producing the product X) Therefor country A should have low prices for product X domestically/indernationally as supply is higher then demand domestically. (I believe - since I haven't looked at this for a few years - I could be wrong *covers his backside*) Lets look at MC, it is C - "A country will have a comparitive advantage in the production of a good if the domestic quantity supplied is greater than the domestic quantity demanded at the world prices." Take care, - Shifty Russian
