The nation of Baa-Baa raises sheep relatively more efficiently than the nation of Snuggle.Snuggle weaves woolen blankets relatively more efficiently than Baa-Baa.Baa-Baa decides to specialize in sheep raising,to sell wool to Snuggle,and to buy blankets from Snuggle.Snuggle decides to specialize in blanket weaving,to sell blankets to Baa-Baa,and to buy wool from Baa-Baa.This international trade illustrates ________ advantage.

Question

Quizplus · Accepted Answer

This scenario illustrates comparative advantage, which occurs when a country specializes in producing and exporting the goods that it can produce at a lower opportunity cost than another country, while importing the goods that the other country can produce at a lower opportunity cost. In this case, Baa-Baa has a comparative advantage in sheep raising, and Snuggle has a comparative advantage in weaving woolen blankets.

The Nation of Baa-Baa Raises Sheep Relatively More Efficiently Than