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...
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.
1 Answer
pohnpei397 | College Teacher | (Level 3) Distinguished Educator
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.