The theory of comparative advantage implies that
A)the United States could have a comparative disadvantage in producing all goods and services.
B)two countries can have a comparative advantage in production of the same good.
C)the world gains from trade since it allows production to move to the countries where their opportunity cost is lowest.
D)the country with the comparative advantage also has an absolute advantage.

Question

Quizplus · Accepted Answer

Comparative advantage suggests that countries should specialize in producing goods and services for which they have a lower opportunity cost. This allows for the most efficient use of resources and leads to a higher overall level of production and consumption. As such, the world gains from trade since it enables countries to specialize in production and move production to countries where their opportunity cost is lowest. Therefore, option C is the correct choice. Option A is incorrect because no country can have a comparative disadvantage in producing all goods and services. Option B is incorrect because two countries cannot have a comparative advantage in producing the same good since one country's opportunity cost will always be higher. Option D is incorrect because a country can have a comparative advantage without having an absolute advantage.

The Theory of Comparative Advantage Implies That