Question 1 Of 2050: Can Italy Produce Grapes At A Low Level
Question 1 of 2050 Pointsif Italy Can Produce Grapes At A Lower Opp
If Italy can produce grapes at a lower opportunity cost than any other nation, Italy is said to have a(n) __________ in the production of grapes.
A. autarky
B. absolute advantage
C. comparative disadvantage
D. comparative advantage
Paper For Above instruction
The concept of comparative advantage is central to understanding international trade and specialization. When a nation can produce a good at a lower opportunity cost than other nations, it possesses a comparative advantage in producing that good. In the case of Italy producing grapes, if Italy's opportunity cost in terms of foregone alternative goods (such as olives or wines) is lower than that of other nations, Italy has a comparative advantage in grape production. This does not necessarily mean it is the absolute best at producing grapes but that it sacrifices less of other goods to produce grapes than any other country. This principle forms the basis for trade: nations specialize in the production of goods where they have a comparative advantage and trade to benefit mutually. Therefore, the correct answer to this question is D. comparative advantage. The concept was first introduced by David Ricardo and remains fundamental in modern trade theory, encouraging efficiency and increased global welfare through specialization and exchange (Krugman, Obstfeld, & Melitz, 2018). Countries tend to export goods in which they hold a comparative advantage and import those in which they do not, leading to a more efficient global allocation of resources (Melitz, 2003). The case of Italy and grapes exemplifies this principle; if Italy's opportunity costs are lower, it should focus on grape production and trade for other goods, maximizing its economic efficiency and contributing to international trade benefits (Oatley, 2019). Thus, the correct choice is D. comparative advantage.
References
- Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Economics (11th ed.). Pearson.
- Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725.
- Oatley, T. (2019). International Political Economy (6th ed.). Routledge.