Traders should specialize in the good in which:
A) they have the lowest opportunity cost.
B) they have an absolute advantage.
C) their trading partner has the lowest opportunity cost.
D) they do not have an absolute advantage.

Question

Quizplus · Accepted Answer

Traders should specialize in the good in which they have the lowest opportunity cost. This means that they should focus on producing the good in which they give up the least amount of producing another good. It is more efficient to trade with someone who has a comparative advantage in another good, meaning they give up less in producing the same good, than for both parties to produce both goods. Specialization and trade according to comparative advantage increases overall production and benefits all parties involved.

Traders Should Specialize in the Good in Which