In order to obtain an efficient allocation of resources worldwide
A) countries that have a lot of resources should ship resources to countries that do not have a lot of resources.
B) countries that have a lot of resources should not trade since poorer countries cannot compete.
C) each country should produce the good they have a comparative advantage in and then trade.
D) no trade among countries should occur.

Question

Quizplus · Accepted Answer

The principle of comparative advantage suggests that each country should specialize in producing the goods that they can produce most efficiently (i.e. they have a comparative advantage) and then trade with other countries for the goods that they cannot produce as efficiently. This results in a more efficient allocation of resources worldwide, as each country is producing the goods that they can produce most efficiently and trading for the goods that they cannot produce as efficiently. Options A, B, and D do not promote efficient resource allocation and can actually hinder economic growth and development.

In Order to Obtain an Efficient Allocation of Resources Worldwide