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Countries gain from trade by producing:a.  the goods they produce at the highest...

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Mizdee | Student, Undergraduate | (Level 1) Valedictorian

Posted September 10, 2012 at 4:40 AM via web

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Countries gain from trade by producing:

a.  the goods they produce at the highest opportunity cost.

b.  the goods they can produce at the lowest opportunity cost.

c.  where the production possibility curve has a slope of -1.

d.  all goods in equal amounts.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 10, 2012 at 4:54 AM (Answer #1)

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The best answer of the choices provided here is B.

According to economic theory, countries should produce and export those goods for which they have a comparative advantage.  One country (Country A) has a comparative advantage over another country (Country B) in a given good when Country A produces that good at a lower opportunity cost than Country B does.  If every country produces and exports the things that it can make at a low opportunity cost, then total production worldwide rises and, in theory, all countries are better off.  Therefore, B is the correct answer.


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