The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is

Question

Raphael Ferguson

Business

21 May, 15:00

The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is

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Answers (1)

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Johnny Graves · Answer 1

The correct answer is: The law of comparative advantage.

Explanation:

Comparative advantage refers to the situation when an individual, a firm, or a nation can produce a good or service at a comparatively lower opportunity cost.

With the opening up of trade the nation or individual will produce and trade the good it has a comparative advantage in or the good it specializes in producing.

It will export this good to others and import the goods it has a higher opportunity cost in producing. In this way, both the nations or individuals will be able to consume beyond their production possibilities curves.