Two countries will choose to specialize and trade only if:
A) the terms of trade fall between the two nations' opportunity costs for producing the goods on their own.
B) the opportunity costs are the same for the two nations.
C) the opportunity costs for producing the goods on their own are astronomically high.
D) one country has an absolute advantage at producing both goods, but a comparative advantage at producing only one good.

Question

Quizplus · Accepted Answer

Countries will specialize and trade if the terms of trade fall between the two nations' opportunity costs for producing the goods on their own. This means that both countries can benefit from trade by producing the good they have a comparative advantage in and trading it for the good the other country has a comparative advantage in, as long as the terms of trade are mutually beneficial.

Two Countries Will Choose to Specialize and Trade Only If