If labor in Mexico is less productive than labor in the United States in all areas of production,
A)then neither nation can benefit from trade.
B)then Mexico can benefit from trade but the United States cannot.
C)then the United States will have a comparative advantage relative to Mexico in the production of all goods.
D)then both Mexico and the United States still can benefit from trade.

Question

Quizplus · Accepted Answer

Even if Mexican labor is less productive than US labor in all areas of production, both countries can still benefit from trade. This is because Mexico may still have a comparative advantage in producing certain goods, meaning they can produce those goods at a lower opportunity cost than the US. By specializing in those goods and trading with the US, both countries can increase their overall welfare.

If Labor in Mexico Is Less Productive Than Labor in the United