Question

The law of comparative advantage explains why a. specialization and exchange will make it possible for trading partners to expand their joint output. b. there will be an inverse relationship between the price of a product and the quantity of it that will be demanded. c. larger firms will have lower per unit costs than smaller firms. d. an increase in the price of a good will lead to an expansion in the quantity supplied by business firms.

Answer 1

Answer:

Option (a) is correct.

Explanation:

The law of comparative advantage states that a country is producing and exporting a good in which it has a comparative advantage and importing a good in which it has a comparative disadvantage.

Therefore, this will make the countries more specialized and there is an exchange of goods among the trading nations.

Each country is then specialized in the production of a good in which it has a comparative advantage and hence, the joint output of the trading nations increases.