Wages are higher in Country X than in Country Y.If the countries decide to trade,then who will benefit?
A) Neither country can benefit unless one knows the product that is traded.
B) Both countries can benefit regardless of the products traded.
C) Only the country that can produce the product more efficiently will benefit.
D) Only the country that can produce the product at a lower opportunity cost will benefit.
E) Both countries will benefit,but only if a trade agreement for specific products is made by their respective governments.

Question

Quizplus · Accepted Answer

If the two countries decide to trade, the country that can produce a specific product at a lower opportunity cost will have a comparative advantage in that product. This means that the country will benefit by specializing in that product and exporting it to the other country, while importing goods that the other country can produce more efficiently. In this way, both countries can benefit from trade based on their respective comparative advantages.

Wages Are Higher in Country X Than in Country Y