Total world output can increase without the addition of resources if
A)countries specialize in the product in which they have an absolute advantage and trade for products in which they have an absolute disadvantage.
B)countries specialize in the product in which they have a comparative advantage and trade for products in which they have a comparative disadvantage.
C)countries impose tariffs on the goods in which they have a comparative advantage.
D)countries replace tariffs with quotas.
E)countries replace quotas with tariffs.

Question

Quizplus · Accepted Answer

The principle of comparative advantage suggests that if countries specialize in producing goods in which they have a lower opportunity cost, and trade with others for their relatively higher opportunity cost goods, total world output can increase without additional resources. This enables countries to allocate their resources more efficiently and enjoy the benefits of economies of scale. Options A, C, D, and E either lead to trade barriers or inefficient allocation of resources, which can hamper economic growth.

Total World Output Can Increase Without the Addition of Resources