If the United States has a comparative advantage over Canada in the production of computers and Canada has a comparative advantage over the United States in the production of cars,then:

Question

Quizplus · Accepted Answer

Both countries can benefit from trade by specializing in the goods they have a comparative advantage in and trading with each other. The United States should specialize in producing computers and trade some of them to Canada in exchange for cars, which Canada has a comparative advantage in producing. This will lead to more efficient production overall and both countries will have access to a wider variety of goods at lower prices. Option A is incorrect as both countries can benefit from trade. Option B is incorrect as the United States has a comparative advantage in producing computers, not cars. Option D is incorrect as hoarding cars will not lead to any benefits for Canada.

If the United States Has a Comparative Advantage Over Canada