The principle of comparative advantage explains how
A)one nation can take advantage of another one through international trade.
B)two nations may engage in mutually beneficial trade, even though one of them is more productive than the other.
C)one individual can take advantage of another through international trade.
D)some people are good at producing everything, while others have no comparative advantages.
E)some nations end up with large trade surpluses.

Question

Quizplus · Accepted Answer

The principle of comparative advantage explains how two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. This is because each country can specialize in producing the goods and services for which they have a comparative advantage (i.e. can produce at a lower opportunity cost) and then trade with the other country for goods and services that they cannot produce as efficiently. This leads to an overall increase in efficiency and economic welfare for both countries.

The Principle of Comparative Advantage Explains How