The Dominican Republic has a comparative advantage in the production of tobacco, and Panama has a comparative advantage in the production of oranges. If both countries specialize based on the theory of comparative advantage
A) only the production of tobacco will increase.
B) only the production of both goods will increase.
C) only the consumption of both goods will increase.
D) the production and consumption of both goods will increase.

Question

Quizplus · Accepted Answer

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 production and consumption of both goods will increase in both countries.

The Dominican Republic Has a Comparative Advantage in the Production