The nation of Baa-Baa raises sheep relatively more efficiently than the nation of Snuggle. Snuggle weaves woolen blankets relatively more efficiently than Baa-Baa. Baa-Baa decides to specialize in sheep raising, to sell wool to Snuggle, and to buy blankets from Snuggle. Snuggle decides to specialize in blanket weaving, to sell blankets to Baa-Baa, and to buy wool from Baa-Baa. This international trade illustrates ________ advantage.

Question

Quizplus · Accepted Answer

The scenario described here highlights the principle of comparative advantage, which states that nations should specialize in producing goods that they can produce more efficiently compared to other countries, even if they have an absolute advantage in producing all goods. In this case, even though Baa-Baa is more efficient in sheep raising and Snuggle is more efficient in blanket weaving, both countries still benefit from trading with each other for mutual gain. This is a classic example of how international trade can create a win-win situation for all parties involved.

The Nation of Baa-Baa Raises Sheep Relatively More Efficiently Than