Quick Definition

Comparative advantage is an economic theory that describes how entities can gain and sustain economic efficiency by specializing in the production of goods and services for which they have the lowest opportunity cost.

Examples

• 1A country like Brazil specializing in coffee production because it has the ideal climate and soil conditions, leading to lower costs compared to other countries.
• 2A software company focusing on developing AI technologies because it has access to advanced research facilities and skilled programmers, rather than producing generic software.
• 3A chef specializing in Italian cuisine because of their specific skills and knowledge, which allows them to produce higher quality dishes at a lower relative cost than other types of cuisine.

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