Question

The law of comparative advantage indicates thata. specialization and exchange will permit trading partners to maximize their joint output.b. a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods.c. a nation can gain from trade only when its trading partners are not low-wage countries.d. countries should export products for which they are high-opportunity cost producer.

Answer 1

Answer:

The correct answer is option a.

Explanation:

The law of comparative advantage states that a country should produce and export that product in which it experiences comparatively lower opportunity costs. The countries will be said to be specializing in the production of goods and services that they can produce at a relatively lower opportunity cost.  

If two countries produce and exchange the goods they specialize in, they will be able to jointly produce more and consume more than they could individually.