What does the law of comparative advantage say?

Answer 1

The Law of Comparative Advantage holds that each country or region can value its production of Good A in the value of Good B that cannot be produced when the resources are used to produce Good A AND the difference in these values between nations can create a competitive advantage for each region in producing the least expensive good and trading for the more expensive one.

For example, let's say that there is a country that could produce 1 computer or 10 banana milkshakes and Another Country that could produce 18 computers or 15 banana milkshakes. While the second country clearly has better production, the first country produces banana milkshakes far more cheaply (0.10 computers vs. 1.2 computers) As a result, if the first country makes the ten banana milkshakes and trades with the second country for computers at any value of 1 milkshake > 0.10 computers but < 1.2 computers, both countries will benefit.