For both parties to benefit from specialization and trade,the trading parties must agree on
A) a price somewhere between their opportunity costs of production.
B) a plan not to trade with other parties.
C) who has the absolute advantage in production.
D) the appropriate level of investment for the future.
E) the source of comparative advantage.

Question

Quizplus · Accepted Answer

Agreeing on a price between their opportunity costs of production ensures that both parties benefit from specialization and trade. This is because each party is producing the good or service in which they have a comparative advantage and trading it with the other party for a price that is lower than their opportunity cost of producing it themselves, resulting in mutual gains from trade. Choices B, C, D, and E are not essential for the parties to benefit from specialization and trade.

For Both Parties to Benefit from Specialization and Trade,the Trading