Economics Comparative Advantage Questions
Government subsidies can play a significant role in determining comparative advantage. By providing financial support to domestic industries, governments can help lower production costs and increase competitiveness in the global market. Subsidies can be used to promote the development of industries that have a comparative advantage, allowing them to expand production and export more goods and services. This can lead to increased specialization and efficiency, ultimately enhancing a country's comparative advantage in specific sectors. However, it is important for governments to carefully consider the potential negative consequences of subsidies, such as distorting market prices and creating trade disputes with other countries.