Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts.If the US exports semiconductors to Mexico and imports auto parts from Mexico,
A) both countries, as a whole, will be better off.
B) all individuals in both countries will be better off.
C) both countries, as a whole, will be worse off.
D) all individuals in both countries will be worse off.

Question

Quizplus · Accepted Answer

This trade scenario represents the principle of comparative advantage, which suggests that countries should specialize in producing goods in which they have a lower opportunity cost and trade for goods in which they have a higher opportunity cost. By exporting semiconductors and importing auto parts, the US and Mexico can both benefit from their comparative advantages, increasing overall efficiency and output. Therefore, both countries will be better off as a result of this trade. It is not possible to determine whether all individuals in both countries will be better off, as some individuals within each country may experience negative effects or not participate in the trade. However, the overall economic benefits for both countries suggest that the majority of individuals are likely to benefit.

Suppose the US and Mexico Both Produce Semiconductors and Auto