Asked by Michelle Tseng on Jun 29, 2024
Verified
Refer to Figure 20.2. the theory of comparative advantage suggests that
A) England should export trucks and import cars.
B) England should export both trucks and cars.
C) the United States should export both trucks and cars.
D) the United States should import cars and export trucks.
Comparative Advantage
The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.
Import
The purchase of goods or services from foreign producers, bringing them into one's home country.
Export
The sale of goods or services produced in one country to another country, contributing to a nation's gross domestic product.
- Gain insight into the notion of comparative advantage and its differentiation from absolute advantage.
- Assess the impact that trade has on the economic performance of countries and the benefits derived from concentrating on specialized fields.
Verified Answer
AP
April ParhamJul 02, 2024
Final Answer :
A
Explanation :
The theory of comparative advantage suggests that a country should export the goods for which it has a lower opportunity cost and import the goods for which it has a higher opportunity cost. In this scenario, England has a lower opportunity cost for producing trucks compared to cars, suggesting it should export trucks and import cars.
Learning Objectives
- Gain insight into the notion of comparative advantage and its differentiation from absolute advantage.
- Assess the impact that trade has on the economic performance of countries and the benefits derived from concentrating on specialized fields.