📚 Learning Guide
Benefits of Specialization and Trade
hard

If Country A has a comparative advantage in wheat production and Country B has a comparative advantage in cloth production, it is true that Country A will never import cloth from Country B under any circumstances.

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

True

B

False

C

Depends on market conditions

D

Only if cloth is cheaper than wheat

Understanding the Answer

Let's break down why this is correct

Answer

It's not true that Country A will never import cloth from Country B. Even though Country A is better at producing wheat and Country B is better at making cloth, both countries can benefit from trade. By specializing in what they do best, Country A can produce more wheat, while Country B can produce more cloth. Then, they can trade some of their goods, allowing each country to get what they need more efficiently. For example, if Country A trades wheat for cloth with Country B, both countries end up with more wheat and cloth than if they tried to produce both items themselves.

Detailed Explanation

Countries can benefit from trading even if one is better at making everything. Other options are incorrect because This suggests that trade can't happen at all; This implies that trade only happens based on market conditions.

Key Concepts

Comparative advantage
Specialization
Opportunity cost
Topic

Benefits of Specialization and Trade

Difficulty

hard level question

Cognitive Level

understand

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