Reference no: EM133004974

Comparative advantage exists when one party (i.e., country) can produce a good or service at a lower opportunity cost than another party.

The opportunity cost of making one additional unit of a good (or service) can be defined as the value of some other good that you have to give up in order to produce this additional unit.

For example, if you can work as many hours as you like at your current employer and get paid $10 per hour, then the opportunity cost of your leisure is $10 per hour.

To see how the theory applies to international finance, read this article to learn about the historical development of the theory

1. .Give an example of how the theory works between two countries.
2. What are the pros and cons of the comparative advantage theory?
3. In your professional life, how does the comparative advantage theory affect you?