Suppose that the country of Xenophobia chose to isolate itself from the rest of the world.Its ruler proclaimed that Xenophobia should become self-sufficient and so would not engage in foreign trade.From an economic perspective,when would this idea make sense
A)if Xenophobia had an absolute advantage in all goods
B)if Xenophobia had no absolute advantages in any good.
C)never, as long as Xenophobia had a comparative advantage in any good
D)never, as long as Xenophobia had an absolute advantage in at least half the goods traded

Question

Quizplus · Accepted Answer

The idea of becoming self-sufficient and not engaging in foreign trade would only make sense if Xenophobia had no comparative advantage in any good. If Xenophobia had a comparative advantage in any good, then it would be better off specializing in producing that good and trading with other countries to obtain goods where it doesn't have a comparative advantage. Therefore, option C is the best choice. Options A and D are incorrect because absolute advantage only considers the productivity of a country in producing a good, not the opportunity cost, which is what matters for comparative advantage. Option B is incorrect because even if a country has no absolute advantages, it can still have a comparative advantage in producing certain goods.

Suppose That the Country of Xenophobia Chose to Isolate Itself