The law of comparative advantage suggests that
A) individuals, states, and nations can all benefit if they trade with others.
B) free trade among nations is harmful to an economy.
C) each economy should strive to be self-sufficient.
D) each country should attempt to produce roughly equal amounts of all goods.

Question

Quizplus · Accepted Answer

The law of comparative advantage shows that when each economy specializes in producing the goods that they have a lower opportunity cost (i.e., the cost of producing a good in terms of the opportunity forgone of producing an alternative good), and then trades with others to obtain the goods that they do not produce efficiently, all parties can benefit. Thus, it is beneficial for individuals, states, and nations to engage in trade. This law rejects the idea that self-sufficiency would be the best strategy.

The Law of Comparative Advantage Suggests That