Prior to international trade,if the price of good X is lower in country A than in country B,
A)country B has an absolute advantage in the production of good X.
B)country B has a comparative advantage in the production of good X.
C)country A has an absolute advantage in the production of good X.
D)country A has a comparative advantage in the production of good X.
E)country B should stop producing good X.

Question

Quizplus · Accepted Answer

The price difference between good X in country A and country B suggests that country A has a lower opportunity cost in producing good X compared to country B, indicating that country A has a comparative advantage in producing good X. Therefore, country A should specialize in producing and exporting good X while country B should specialize in producing other goods where it has a comparative advantage.

Prior to International Trade,if the Price of Good X Is