Question

For each of the following propositions the first word in your answer should be the word True or the word False followed by a brief explanation as to why the proposition is true or false.

assume that Frank and Athena can produce either chairs or tables. If Athena has a comparative advantage in producing chairs, then she would be able to sell chairs for a higher price than Frank.

Answer 1

A situation of comparative advantage would mean, that the overall costs of production or the quality of production of Athena are relatively higher than that of Frank.

Comparative advantage tends to give a benefit to one company over the other it can also be translated to individuals or governments as a whole.

In most cases of comparative advantage usually people tend to lower the prices at which they offer their products to stay in competition and to be able to sell more because of the advantage which they have in production. Mass production is a trait of the individual which possesses this skill.

In the case as highlighted above, if Athena was to sell at a higher price than Frank, it would lose its comparative advantage. Since Frank's price would find more buyers than Athena’s and therefore Frank would have more benefits than her.

Thus the notion that comparative advantage would allow her to sell at a higher price is FALSE

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