Question

Why should countries specialize in producing goods with which they have a comparative advantage rather than an absolute advantage?

Answer 1

The correct answer is that countries specialize in producing goods with which they have a comparative advantage rather than an absolute advantage because they can produce more of certain products and services in a more efficient way.

Countries can also trade with other nations for products and services they can’t provide on their own and countries produce goods which they have a comparative advantage because they can produce more products and services to contribute to better global prosperity. Countries not always have the material or the know-how to produce everything.

There are other countries that can do it in a more efficient way or with better quality than others. The Comparative Advantage helps the countries to concentrate on what they do best and then trade it with other countries that need it, and vice-versa, in order to be more efficient and productive.

Answer 2

You get a greater gain from trade when the trading partners produce goods for which they each have comparative advantage.