A fundamental principle of international trade is that

Question

Quizplus · Accepted Answer

The principle of comparative advantage states that a country should produce where its opportunity cost of production is lowest, meaning that it can produce a good at a lower cost (in terms of foregone production of another good) than other countries. This means that a country could have a comparative advantage in producing certain goods, even if it has higher resource costs than other countries. Therefore, option A is incorrect. Option C is correct because two countries can have different comparative advantages in producing the same good due to differences in their resource endowments or other factors. Option D is also incorrect because the world gains from trade not only by allowing production to move to countries with the lowest resource cost, but also by allowing countries to specialize in producing goods in which they have a comparative advantage, leading to an overall increase in efficiency and higher global output.

A Fundamental Principle of International Trade Is That