Asked by Jincy Robin on Jun 07, 2024
Verified
Total world output can increase without the addition of resources if
A) countries specialize in the product in which they have an absolute advantage and trade for products in which they have an absolute disadvantage.
B) countries specialize in the product in which they have a comparative advantage and trade for products in which they have a comparative disadvantage.
C) countries impose tariffs on the goods in which they have a comparative advantage.
D) countries replace tariffs with quotas.
E) countries replace quotas with tariffs.
Absolute Advantage
Absolute Advantage refers to the capability of a country or entity to produce a good or service more efficiently than its competitors, using fewer resources.
Comparative Advantage
is an economic principle that describes how countries or individuals can gain by specializing in the production of goods they can produce more efficiently compared to others.
Tariffs
Taxes on imports or exports between sovereign states.
- Absorb the core principles of specialization and comparative advantage in the realm of international trade.
- Separate the ideas of absolute and comparative advantage within the domain of international trade relations.
- Provide an exposition on the notion of opportunity cost related to the production and exchange of goods.
Verified Answer
SW
Samantha WilsonJun 13, 2024
Final Answer :
B
Explanation :
The principle of comparative advantage suggests that if countries specialize in producing goods in which they have a lower opportunity cost, and trade with others for their relatively higher opportunity cost goods, total world output can increase without additional resources. This enables countries to allocate their resources more efficiently and enjoy the benefits of economies of scale. Options A, C, D, and E either lead to trade barriers or inefficient allocation of resources, which can hamper economic growth.
Learning Objectives
- Absorb the core principles of specialization and comparative advantage in the realm of international trade.
- Separate the ideas of absolute and comparative advantage within the domain of international trade relations.
- Provide an exposition on the notion of opportunity cost related to the production and exchange of goods.