Suppose there are only two goods in the world,wheat and shoes.If it is true that with its vast resources the United States could produce both more wheat and more shoes than Brazil,
A)Brazil will never have a comparative advantage and,thus,can never gain from trading with the United States.
B)trade between the United States and Brazil will make the United States better off but will leave Brazil worse off unless the wage of workers in Brazil rises to equal that of American workers.
C)total production of wheat and shoes cannot be increased through specialization and trade.
D)both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Brazil than in the United States.

Question

Quizplus · Accepted Answer

The principle of comparative advantage states that countries should specialize in producing goods in which they have a lower opportunity cost and trade with other countries for goods in which they have a higher opportunity cost. Therefore, even if the US can produce both wheat and shoes more efficiently than Brazil, as long as the relative cost of producing the two goods is different in the two countries, there is room for mutually beneficial trade between the two countries. Specialization and trade allow countries to produce beyond their production possibilities frontier and increase total production of goods and services. Thus, both countries can gain from specialization and trade as long as they have different opportunity costs of producing the two goods.

Suppose There Are Only Two Goods in the World,wheat and Shoes.If