Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Identify the goods each country can produce with their resources.
B
Determine the opportunity cost of producing each good.
C
Specialize in the production of goods with a comparative advantage.
D
Engage in trade to exchange specialized goods for mutual benefit.
Understanding the Answer
Let's break down why this is correct
Answer
Countries can benefit from trade by focusing on their strengths, which is known as comparative and absolute advantage. Absolute advantage occurs when a country can produce a good more efficiently than another country. For example, if Country A can make 10 cars in a day while Country B can only make 5, Country A has an absolute advantage in car production. Comparative advantage, on the other hand, means a country can produce a good at a lower opportunity cost compared to others. If Country A is better at making cars but Country B is better at making wheat, both countries can benefit by trading cars for wheat, allowing each to focus on what they do best.
Detailed Explanation
First, countries need to know what they can make best with what they have. Other options are incorrect because Some might think figuring out costs comes first; People may believe specialization should happen right away.
Key Concepts
Comparative Advantage
Absolute Advantage
International Trade
Topic
Comparative and Absolute Advantage
Difficulty
medium level question
Cognitive Level
understand
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