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stiv31 [10]
3 years ago
7

How can a country gain from specialization and​ trade? A. A country can specialize in producing that for which it has an absolut

e advantage and then trade for other needed goods and services. B. A country can specialize by using all available resources to produce goods and services to avoid trading with other countries. C. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services. D. A country can specialize by using all available resources to invest in capital goods to promote economic growth. E. A country can specialize in producing that which is most scarce and then trade for other needed goods and services
Business
2 answers:
Cerrena [4.2K]3 years ago
8 0

Answer:

A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

Explanation:

Gulf countries are rich in oil reserves so they have comparative advantage over other countries in producing mineral oil . So they produce oil and trade it with other countries in exchange with other goods in which it has disadvantage  in  producing . This leads to wealth creation with optimum utilization of resources on global scale.

strojnjashka [21]3 years ago
6 0

Answer:

C. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

Explanation:

<em>Comparative advantage</em> is simply evaluating the opportunity cost of other benefits or costs, if the country is opting to choose for a specific category of goods for production purposes.

For example, let's say US can produce 20 Television (TV) sets and 50 Air Conditioners in a month. Here, the opportunity cost of producing 1 TV set is 50/20 i.e. 2.5 Air Conditioners. Similarly, the opportunity cost of producing 1 Air Conditioner (AC) is 20/50 i.e. 0.4 TV set. Hence, US should produce Air Conditioners over TV sets as per <em>Comparative Advantage</em> concept.

Take another example, let's say UK can produce 50 Television (TV) sets and 20 Air Conditioners in a month. Hence, the opportunity cost of producing 1 TV set is 20/50 i.e. 0.4 Air Conditioner. On the other hand, the opportunity cost of producing 1 AC is 50/20 i.e. 2.5 TV sets. Thus, UK should produce TV sets over AC's as per <em>Comparative Advantage </em>model.

Hence, US should export AC's to UK and import TV sets from UK to gain from specialization and trade.

<em> In this way nations can gain from specialization and trade by making use of Comparative Advantage theory</em>.

It is to be noted that <em>Absolute Advantage model </em>of Adam Smith is also good as it highlights production of that good by a country, which it can produce in large quantities with fewer resources and minimal time than any other nation in the world. But the <em>Comparative Advantage Model </em>developed by David Ricardo considers opportunity cost and is much more refined than Absolute Advantage Model.

<em></em>

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