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Comparative advantage

A country/region, individual or company has a comparative advantage if it produces a good or service at a lower opportunity cost than that of a competitor. This doesn't necessarily mean the advantaged company produce the good or service more efficiently than its competitor. The 2 companies would produce the most as a whole if each company chooses to produce their respective comparatively advantaged good or service, though one of them might be absolutely inefficient than the other in producing all types of goods and services.

Comparative advantage is the reason that brings division of work into existence. Everyone has a comparative advantage and should be doing something even if she's a 4 year old girl.

Theories of comparative advantage backs international trade in all fields, claiming that we would all be better off with trade and worse off without it.

Take a peek at the our textbook about comparative advantage at Specialization & Comparative Advantage.

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