📚 Learning Guide
Understanding Comparative Advantage
easy

If a country specializes in producing goods where it has a comparative advantage, what is the likely effect on its trade relationships with other countries?

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Choose the Best Answer

A

It will likely improve trade relationships by allowing both countries to specialize and benefit from each other's strengths.

B

It will weaken trade relationships because other countries will want to compete directly against it.

C

It will have no effect on trade relationships, as comparative advantage does not influence trade dynamics.

D

It will force other countries to lower their production standards to compete.

Understanding the Answer

Let's break down why this is correct

Answer

When a country specializes in producing goods where it has a comparative advantage, it means it can produce those goods more efficiently than others. This efficiency often leads to lower production costs, allowing the country to sell its goods at competitive prices. As a result, other countries may want to trade with this specialized country to obtain these goods, which can strengthen trade relationships. For example, if Country A is great at producing coffee and Country B excels in making electronics, they can trade coffee for electronics, benefiting both. This kind of trade not only boosts their economies but also creates stronger ties between the countries.

Detailed Explanation

When a country focuses on what it does best, it can trade with others for what they do best. Other options are incorrect because Some might think that focusing on strengths makes others feel threatened; It's a common mistake to think that specialization doesn't change trade.

Key Concepts

Comparative Advantage
Trade Relationships
Specialization
Topic

Understanding Comparative Advantage

Difficulty

easy level question

Cognitive Level

understand

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