Consider the data in the following table.

-Referring to the table above, when trade opens up between Countries A and B, Country A should specialize in producing:
A) computers.
B) wheat.
C) both computers and wheat.
D) neither computers nor wheat.
E) some product other than computers or wheat.

Question

Consider the data in the following table.
 
-Referring to the table above, when trade opens up between Countries A and B, Country A should specialize in producing:
A) computers. 
B) wheat. 
C) both computers and wheat. 
D) neither computers nor wheat. 
E) some product other than computers or wheat.

Quizplus · Accepted Answer

Country A should specialize in producing wheat if it has a comparative advantage in wheat production over computers when compared to Country B. Specialization according to comparative advantage allows each country to produce the good for which it has a lower opportunity cost, leading to more efficient global production and potential gains from trade.

Consider the Data in the Following Table