Question

What is comparative advantage?

Short answer

Essentially, "comparative advantage" is the ability of a country to produce a product at a lower cost than other countries, or to have a lower opportunity cost of production.

Step-by-step solution

Step 1:

In the case where a country has two different goods, x and y, and the opportunity cost for producing good x is lower than that of producing good y, then the country exports good x and imports good y from abroad. In international trade, Ricardo developed his theory of comparative advantage.