What are the 3 steps of comparative advantage?

Answer 1

The three steps of comparative advantage are:

1. Identify Opportunity Costs: Determine the opportunity costs of producing different goods or services for each producer, which helps in understanding what is sacrificed to produce one item over another.

2. Specialization: Each producer or country should specialize in the production of the good or service for which they have the lowest opportunity cost, thus maximizing efficiency.

3. Trade: Engage in trade to exchange the specialized goods, allowing each party to benefit from lower prices and increased variety, leading to greater overall economic efficiency.