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

Question

Quizplus · Accepted Answer

The principle of comparative advantage states that countries should specialize in the production of goods and services in which they have a lower opportunity cost and trade with other countries that have a higher opportunity cost in producing those goods and services. This way, resources are directed to their highest productivity and total output of both countries increases. Hence, option A is the correct answer. Options B, C, and D do not accurately reflect the principle of comparative advantage.

According to the Principle of Comparative Advantage, Specialization and Trade