Question

multiple choice question
which trade situation best represents comparative advantage?
○ although coffee is consumed by people around the world, most of it is grown in tropical countries.
○ canada sells its plentiful agricultural products to korea, which leads in technological development.
○ southern africa produces more than half of the diamonds in the world and exports them to many countries.

Explanation:

Comparative advantage refers to a country producing a good at a lower opportunity cost than another, then trading it for goods where the other country has a lower opportunity cost. The first and third options describe absolute advantage (having more abundant resources or higher production volume for a single good). The second option shows each country specializing in what they are relatively more efficient at (Canada in agriculture, Korea in tech) and trading, which matches comparative advantage.

Answer:

B. Canada sells its plentiful agricultural products to Korea, which leads in technological development.