Asked by Preanna Williams on Jun 12, 2024
Verified
The United States has a comparative advantage in the production of wheat, and Haiti has a comparative advantage in the production of sugar. If both countries specialize based on the theory of comparative advantage
A) only the production of wheat will increase.
B) the production and consumption of both goods will increase.
C) only the production of both goods will increase.
D) only the consumption of both goods will increase.
Comparative Advantage
The capacity of a person, business, or nation to create a product or offer a service with a lesser opportunity cost compared to its rivals.
Production
The process of creating goods and services through the combination of labor, materials, and technology.
Consumption
The use of goods and services by households or individuals.
- Recognize the benefits of specialization and trade for countries involved.
Verified Answer
NP
nagasaikiran ponnapalliJun 16, 2024
Final Answer :
B
Explanation :
According to the theory of comparative advantage, if each country specializes in the production of the good for which it has a comparative advantage, then trades with the other, both the production and consumption of both goods will increase. This is because each country is producing what it is relatively more efficient at, leading to greater overall output and allowing for trade that benefits both parties.
Learning Objectives
- Recognize the benefits of specialization and trade for countries involved.