Future Business Leader Achievments (FBLA) Economics Practice Exam

A country's comparative advantage in the production of a good is more influenced by which of the following?

1. Its systems of tariffs and quotas.

2. The kind of resources that the country has.

3. The kind of goods that it exports and imports.

4. Who benefits and who gains by foreign trade.

The correct answer is: The kind of resources that the country has.

The concept of comparative advantage revolves around the ability of a country to produce a good at a lower opportunity cost than another country. This typically stems from the inherent resources and capabilities that a country possesses, such as labor, capital, land, and technology. When considering this, the kind of resources that a country has is a fundamental determinant because it shapes the production possibilities and efficiency. For example, a country rich in fertile land may have a comparative advantage in agricultural products, while a country with advanced technology may excel in manufacturing high-tech goods. The availability and quality of these resources directly influence a country's production decisions and ability to engage effectively in international trade, making resource endowment the most significant factor in determining comparative advantage.