Question

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.

Accepted Answer

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.

International Trade

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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