Suppose that the country of Xenophobia chose to isolate itself from the rest of the world.Its ruler proclaimed that Xenophobia should become self-sufficient,so it would not engage in foreign trade.From an economic perspective,this idea would
A)make sense if Xenophobia had an absolute advantage in all goods.
B)make sense if Xenophobia had no absolute advantages in any good.
C)not make sense as long as Xenophobia had a comparative advantage in some good.
D)not make sense as long as Xenophobia had an absolute advantage in at least half the goods that could be traded.

Question

Quizplus · Accepted Answer

If a country has a comparative advantage in some good, it means that it can produce that good at a lower opportunity cost than another country. By engaging in trade, the country can specialize in producing the good in which it has a comparative advantage and import the goods it has a higher opportunity cost of producing. By isolating itself and not engaging in trade, Xenophobia would be forgoing the benefits of specialization and potentially producing goods at a higher opportunity cost. Therefore, the idea would not make sense as long as Xenophobia had a comparative advantage in some good.

Suppose That the Country of Xenophobia Chose to Isolate Itself