Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Both countries will benefit from increased overall production and consumption.
B
Country A will dominate country B in all aspects of trade.
C
Country B will not be able to trade with country A without incurring losses.
D
The trade relationship will lead to equal production levels in both countries.
Understanding the Answer
Let's break down why this is correct
Answer
When country A specializes in producing goods where it has a comparative advantage, it means it can produce those goods more efficiently than other countries, including country B. This specialization allows country A to produce more of those goods at a lower opportunity cost, meaning it gives up less of other goods to make them. As a result, country A can trade these goods with country B, which specializes in different goods where it has its own comparative advantage. This trade relationship benefits both countries because they can obtain goods they need at a lower cost than if they tried to produce everything themselves. For example, if country A specializes in making cars while country B specializes in growing coffee, they can trade cars for coffee, allowing both countries to enjoy more products than they could produce alone.
Detailed Explanation
When countries focus on what they do best, they can produce more goods. Other options are incorrect because Some might think one country will always win in trade; It's a common belief that trade always costs one side.
Key Concepts
Comparative Advantage
International Trade
Opportunity Cost
Topic
Absolute and Comparative Advantage
Difficulty
hard level question
Cognitive Level
understand
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