According to comparative advantage, trade between two countries
A) maximizes the amount of inputs that are used in the production of all products.
B) guarantees that consumption levels will be equal in the two countries.
C) will benefit all the industries in each of the countries.
D) allows each of the trading countries to allocate its resources most efficiently.

Question

Quizplus · Accepted Answer

Comparative advantage suggests that countries should specialize in producing goods for which they have a lower opportunity cost than their trading partners. This specialization and subsequent trade allow each country to allocate its resources more efficiently, leading to an overall increase in production and consumption possibilities for both countries.

According to Comparative Advantage, Trade Between Two Countries