Suppose that after specializing according to comparative advantage,a country is trading with another nation that also specializes according to its comparative advantage.Which of the following statements are true for the first country?
i.It enjoys gains from trade.
ii.It must have an absolute advantage in the production of the good it produces.
iii.It is producing at a point beyond its PPF.
A) i only
B) i and ii
C) i and iii
D) ii and iii
E) i, ii, and iii

Question

Quizplus · Accepted Answer

i. Specializing according to comparative advantage and trading allows a country to consume beyond its production possibilities frontier (PPF), which represents gains from trade. ii. A country does not need to have an absolute advantage in the production of a good to benefit from trade; comparative advantage is sufficient. iii. Specialization and trade do not mean a country is producing beyond its PPF; rather, it allows consumption beyond the PPF.

Suppose That After Specializing According to Comparative Advantage,a Country Is