Trade results from
A) comparative advantage.
B) absolute advantage.
C) self-sufficiency.
D) diminishing returns.

Question

Quizplus · Accepted Answer

Under comparative advantage, countries specialize in the production of goods and services that they can produce at a lower opportunity cost than other countries. This leads to greater efficiency and ultimately leads to trade as countries can then trade their surpluses with other countries, creating gains from trade.

B) Absolute advantage refers to a country's ability to produce a good using fewer resources than another country. While this can lead to trade, it is not necessarily the best choice as countries can only produce a limited range of goods using absolute advantage.

C) Self-sufficiency is a model where a country produces all its goods and services without relying on other countries. This approach can limit a country's growth and economic development as it ignores the benefits of trade.

D) Diminishing returns is a concept where adding more resources to production results in smaller and smaller increases in output. This can limit a country's ability to compete in international markets and may not result in trade.

Trade Results from