Question

Answer these questions: 7 to 15 lines each a- Do you agree with Ricardo’s comparative advantage? Why b- How does monopoly capital affect the equilibrium between supply and demand? .

Answer 1

a) Yes, Ricardo's theory of comparative advantage, which mentions that a country or entity would produce more and consume less of a good for which it has a comparative advantage makes absolute sense because the opportunity cost of consuming more would be high. On the other hand, the opportunity cost of producing more is comparatively low , hence , there will be benefits from trade.

b) A monopoly's capital can be responsible in increasing prices indefinitely and even at such higher prices, consumers would be compelled to buy goods and services as substitute goods would be scarce(consider none, since the only producer is the monopoly). On the other hand, the monopoly could also reduce quantity supplied and hence, increase prices that way , while demand is constant. Thus, the equilibrium is affected.