According to the principle of comparative advantage, specialization and trade increase a nation's total output because:
A) resources are directed to their highest productivity.
B) the output of the nation's trading partner declines.
C) the nation can produce outside its production possibilities frontier.
D) the problem of unemployment is eliminated.

Question

Quizplus · Accepted Answer

The principle of comparative advantage suggests that nations should specialize in producing the goods and services for which they have a lower opportunity cost, meaning the cost of producing one good in terms of other goods that could have been produced instead. By specializing in certain goods or services, a nation is able to allocate its resources more efficiently and increase total output. Therefore, the correct answer is A - resources are directed to their highest productivity.

According to the Principle of Comparative Advantage, Specialization and Trade