Comparative advantage is determined by ?
Correct answer: B. relative differences in labor productivity between countries
- A. actual differences in labor productivity between countries
- B. relative differences in labor productivity between countries
- C. Both (a) and (b)
- D. Neither (a) nor (b)
Explanation
Comparative advantage depends on relative opportunity costs, which arise from comparing productivity ratios between countries rather than simply comparing each country's absolute productivity. Thus, relative differences in labor productivity are the relevant basis.
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