Comparative advantage implies that a country will find it difficult to conclude

Question

Comparative advantage implies that a country will

find it difficult to conclude free trade agreements with other nations.

import those goods in which the country has a comparative advantage.

export those goods in which the country has a comparative advantage.

export goods produced by domestic industries with low wages relative to its trading partners.

find it difficult to conclude free trade agreements with other nations.

import those goods in which the country has a comparative advantage.

export those goods in which the country has a comparative advantage.

export goods produced by domestic industries with low wages relative to its trading partners.

Explanation / Answer

Comparative advantage means the ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. Based on this definition therefore, in the context of the question above, the correction option is

"export those goods in which country has a comparative advantage"

The fourth option which is "export goods produced by domestic industries with low wages relative to its trading partners" also sounds like the right answer, but it may not be, since low wages alone doesn't guarantee comparative advantage. It is possible that the raw material cost is quite high which makes the overall cost more than its partners.

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