To achieve the gains from trade, each nation should specialize in the production of a good or service if:

Question

Quizplus · Accepted Answer

Specialization should be based on comparative advantage, which means the country should focus on producing the good or service in which it has a lower opportunity cost. This can be measured by the amount of alternative products the country has to forgo in order to produce one unit of the good or service. Therefore, choice D - the country can make the product while forgoing fewer alternative products than any other country - is the best option.

To Achieve the Gains from Trade, Each Nation Should Specialize