Countries gain from specializing in producing goods in which they have ________ and trading for goods in which other countries have ________.
A)a comparative advantage; an absolute advantage
B)an absolute advantage; an absolute advantage
C)a comparative advantage; a comparative advantage
D)an absolute advantage; a comparative advantage

Question

Quizplus · Accepted Answer

According to the theory of comparative advantage, countries should specialize in producing the goods they can produce at a lower opportunity cost than other countries, i.e. they have a comparative advantage in producing those goods. By doing so, they can trade with other countries and obtain goods they cannot produce efficiently or at all, thereby benefiting both sides. An absolute advantage refers to a country being able to produce a good more efficiently than another country, whereas comparative advantage takes into account the relative opportunity cost of producing one good versus another.

Countries Gain from Specializing in Producing Goods in Which They