Theory of comparative advantage and how it affect the international trade. Concept Introduction: Opportunity Cost : It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits. Comparative Advantage: In a trade, a country is said to have comparative advantage in producing a product or service when the opportunity cost of producing it is less in comparative to the nation with which it is trading. Production Possibility Frontier (PPF): It is defined as the combination of all goods that can be produced efficiently with the available resources. It is also called production possibility curve. It may be increasing decreasing or constant in nature.

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Chapter 5, Problem 19P

To determine

Theory of comparative advantage and how it affect the international trade.

Concept Introduction:

Opportunity Cost: It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits.

Comparative Advantage: In a trade, a country is said to have comparative advantage in producing a product or service when the opportunity cost of producing it is less in comparative to the nation with which it is trading.

Production Possibility Frontier (PPF): It is defined as the combination of all goods that can be produced efficiently with the available resources. It is also called production possibility curve. It may be increasing decreasing or constant in nature.

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