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If there is no comparative advantage between two countries: a. one country must be more...

Question:

If there is no comparative advantage between two countries:

a. one country must be more productive in producing all goods than the other.

b. the benefits resulting from trade are increased.

c. there are no gains from specialization and trade.

d. each country should specialize in the production of a particular commodity.

Comparative Advantage

Comparative advantage in production means the ability to produce a good at a lower opportunity cost relative to others. Where the opportunity cost is measured by the amount of the other good that must be given up to be able to produce one more unit of the good of interest.

Answer and Explanation:

(C) is true.

The gain from trade is the result of specialization. Where countries produce the good that they have the comparative advantage in its...

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Comparative Advantage, Specialization & Exchange

from CLEP Social Sciences and History: Study Guide & Test Prep

Chapter 57 / Lesson 3
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