For two people who are planning to trade, it is impossible to:
A)have a comparative advantage in both goods.
B)have an absolute advantage in both goods.
C)specialize in the production of one good.
D)trade so that both people will be better off.

Question

Quizplus · Accepted Answer

Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer. Each person can have a comparative advantage in one good over the other, but it is impossible for both to have a comparative advantage in both goods. Therefore, it is impossible to have a comparative advantage in both goods. However, it is possible for one person to have an absolute advantage in both goods. Specialization and trade allow for both individuals to produce and consume the good in which they have a comparative advantage, resulting in both people being better off.

For Two People Who Are Planning to Trade, It Is