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Which situation is an example of comparative advantage in an international market?
Country A decides to grow extra potatoes so they have more to export, while Country B does not grow potatoes to export.
Factories in Country A and Country B produce the same number of tablet computers. Country A’s factories could be used instead to build more laptops than the factories in Country B.
Country A invests in a new technology while Country B chooses to invest in education.
Country A can produce 100 units of rice per acre of farmland, while Country B can only produce 70 units of rice per acre of farmland using the same resources.
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The second option.
Comparative advantage depends on differences in opportunity cost, not absolute output. In the second scenario both countries make the same number of tablets, but Country A could instead make more laptops with those factories — so A has a lower opportunity cost (comparative advantage) in laptops and B has the comparative advantage in tablets. The other options describe absolute advantage or actions without information on opportunity costs.
Comparative advantage depends on differences in opportunity cost, not absolute output. In the second scenario both countries make the same number of tablets, but Country A could instead make more laptops with those factories — so A has a lower opportunity cost (comparative advantage) in laptops and B has the comparative advantage in tablets. The other options describe absolute advantage or actions without information on opportunity costs.
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