The law of comparative advantage explains why a nation will benefit from trade when

a. it exports more than it imports.

b. its trading partners are experiencing offsetting losses.

c. it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer.

d. it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer. cengage

Question

Damaris Lam

Business

15 May, 11:37

The law of comparative advantage explains why a nation will benefit from trade when

a. it exports more than it imports.

b. its trading partners are experiencing offsetting losses.

c. it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer.

d. it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer. cengage

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Answers (1)

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Gavin Valdez · Answer 1

The correct answer is option d.

Explanation:

The law of comparative advantage states that a country will be able to benefit from international trade if it produces and exports the good that it has a comparatively lower opportunity cost in producing.

Comparative advantage refers to comparatively lower opportunity costs. A country will specialize in the production of a good that it can produce at a lower opportunity cost.

Both the countries will be able to benefit from trade and jointly increase their production and consumption if they export goods they can produce at lower opportunity cost and import goods they can produce at higher opportunity cost.