Question

The principle of comparative advantage

does not hold true in cases of constant opportunity costs.

does not hold true in cases of increasing opportunity costs.

holds true in cases of constant opportunity costs but not in cases of increasing opportunity costs.

holds true in cases of increasing opportunity costs, as it does with constant opportunity costs.

may or may not hold true in cases of increasing opportunity costs.

Answer 1

Ans:

holds true in cases of increasing opportunity costs, as it does with constant opportunity costs.

Comparative advantage is the ability of a country to produce a good or service at lower opportunity cost than another.It means the country can produce at lower cost than other countries.The principle of comparative advantage holds true in cases of increasing opportunity costs and constant opportunity costs.In case of constant opportunity cost PPF is linear and in case of increasing opportunity cost PPF is concave.