Which of the scenarios below best displays how international trade allows for specialization?
A) You are better at mowing lawns than your neighbor who is better at gardening.
B) Truck drivers stay awake on long routes by drinking Colombian coffee.
C) The United States and Canada can both produce lumber, but the U.S. buys lumber from Canada because it has a greater yield per acre.
D) Cuba does not have a comparative advantage in producing antibiotics, but due to economic sanctions, relies on its own supply of medicines.

Question

Quizplus · Accepted Answer

International trade allows for specialization because countries can focus on producing goods that they are relatively more efficient at producing, also known as having a comparative advantage. In this scenario, the U.S. and Canada both have the ability to produce lumber, but Canada has a greater yield per acre and is therefore relatively more efficient at producing lumber. As a result, the U.S. can specialize in producing goods that it is relatively more efficient at producing and trade with Canada for lumber, ultimately increasing efficiency and economic welfare for both countries.

Which of the Scenarios Below Best Displays How International Trade