Comparative advantage indicates that:

Question

Quizplus · Accepted Answer

Comparative advantage refers to the ability of a country to produce a good or service at a lower opportunity cost than another country. This means that even if a country is not as efficient as another country in producing all types of goods, it can still benefit from trade by specializing in and exporting the goods that it can produce most efficiently. Therefore, choice B is the correct answer. Choice A is incorrect because specialization and exchange will actually increase joint output. Choice C is incorrect because trade with low-wage countries does not necessarily mean that wages in high-wage countries will go down.

Comparative Advantage Indicates That