Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It leads to one country dominating the market entirely.
B
It allows both countries to specialize and trade, leading to a more efficient allocation of resources.
C
It causes price wars between the countries.
D
It prevents trade from occurring altogether.
Understanding the Answer
Let's break down why this is correct
Answer
When two countries have different absolute advantages, it means each country can produce certain goods more efficiently than the other. This creates a situation where they can benefit from trading with each other. For example, if Country A is better at making cars and Country B is better at growing wheat, they can specialize in what they do best and trade. As they exchange goods, the overall supply increases, which can lower prices and increase options for consumers in both countries. This interdependence helps reach a new market equilibrium, where both countries and their consumers are better off than if they tried to produce everything on their own.
Detailed Explanation
When countries specialize in what they do best, they can trade with each other. Other options are incorrect because Some might think one country will take over everything; It's a common mistake to think countries will fight over prices.
Key Concepts
absolute advantage
interdependence
market equilibrium.
Topic
Understanding Comparative Advantage
Difficulty
hard level question
Cognitive Level
understand
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