The concept of comparative advantage implies that:
A) there are winners and losers when people trade without specializing.
B) people have to be self-sufficient.
C) people benefit from specializing and trading with one another.
D) only those people who are productive benefit from trade.

Question

Quizplus · Accepted Answer

The concept of comparative advantage suggests that people benefit from specializing in the production of a good or service in which they have a lower opportunity cost and trading with others who specialize in productions that have higher opportunity cost. Through trade, both parties can gain higher utility or satisfaction than if they had produced everything for themselves. Therefore, option C is the best choice as it correctly conveys the benefits of specialization and trade. The other options fail to capture the essence of the concept of comparative advantage.

The Concept of Comparative Advantage Implies That