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AAEC 2305 Fundamentals of Ag Economics - page 26 / 27

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(continued)

Comparative Advantage – a country has a comparative advantage in those goods for which it has the lowest opportunity cost compared to its trading partners.

What is meant by “lowest opportunity cost”?

If countries export those goods and services for which that have a comparative advantage and import goods for which they have a comparative disadvantage – Trade is mutually beneficial to all nations.

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