To maximize total output,Smith should specialize in producing ________,whereas Ricardo should specialize in producing ________.

Question

Quizplus · Accepted Answer

The principle of comparative advantage suggests that each individual should specialize in producing the good for which they have the lower opportunity cost, and trade with others for goods which have a higher opportunity cost. Assuming that Smith and Ricardo have different opportunity costs for producing computers and smartphones, the best choice for maximizing total output would be for Smith to specialize in producing smartphones (since they have a lower opportunity cost for producing them), and for Ricardo to specialize in producing computers (since they have a lower opportunity cost for producing them). Therefore, the best choice is option B, where Smith specializes in smartphones and Ricardo specializes in computers.

To Maximize Total Output,Smith Should Specialize in Producing ________,Whereas Ricardo