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 curve
D) The problem of unemployment is eliminated

Question

Quizplus · Accepted Answer

According to the principle of comparative advantage, each country should specialize in the production of goods and services in which it has a lower opportunity cost and trade with other countries to produce and exchange goods and services that each country can produce efficiently. By doing this, resources are allocated to the production of goods and services that they are most efficient in producing, resulting in an increase in the total output of both countries involved in the trade. Therefore, choice A is the correct answer since it describes the principle of comparative advantage.

According to the Principle of Comparative Advantage,specialization and Trade Increase