Table 3-3

-Refer to Table 3-3.If Montana and Missouri were to specialize and engage in trade that would benefit both states,they would most likely base their decisions on the principle of
A)absolute advantage.
B)comparative advantage.
C)maximum opportunity cost.
D)zero-sum trade.

Question

Table 3-3
 
-Refer to Table 3-3.If Montana and Missouri were to specialize and engage in trade that would benefit both states,they would most likely base their decisions on the principle of
A)absolute advantage. 
B)comparative advantage. 
C)maximum opportunity cost. 
D)zero-sum trade.

Quizplus · Accepted Answer

The principle of comparative advantage suggests that Montana and Missouri should specialize in producing the goods for which they have a lower opportunity cost and then trade with each other to obtain the other goods they need. This will result in both states being able to consume more goods than would be possible without trade. Absolute advantage, maximum opportunity cost, and zero-sum trade do not take into account the potential gains from trade and are not suitable for this scenario.

Table 3-3 -Refer to Table 3-3.If Montana and Missouri Were to Specialize