Question

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain

Short answer

False

Step-by-step solution

Step 1. Definition

Comparative advantage refers to the ability of a person, firm, or region to produce a good or service at a lower opportunity cost. Opportunity cost is the cost of giving up the second best alternative.

Step 2. Explanation

A person, region, or firm is said to have a comparative advantage in the production of a good or service when they can produce it at a lower opportunity cost than others.

Comparative advantage has many sources such as geographical location, climate, availability of natural resources, etc. Climate and mineral deposits are two of the sources but are not the only sources of comparative advantage. Other factors such as economies of scale, skilled workforce, etc also determine a comparative advantage.

So, the given statement is false.