To benefit the most from trade, a person should:
A) specialize in an activity for which she has an absolute advantage.
B) specialize in an activity for which she has a comparative advantage.
C) do everything she possibly can.
D) do as little as possible.

Question

Quizplus · Accepted Answer

Specializing in an activity for which a person has a comparative advantage means that they produce the good or service with the lowest opportunity cost compared to another person or country. This allows both parties in the trade to benefit as they can trade goods and services for a lower opportunity cost than they would have been able to produce it themselves. This ultimately leads to a more efficient allocation of resources and an increase in overall economic welfare. Choosing option A, specializing in an activity for which a person has an absolute advantage, may not necessarily lead to maximum benefit as it does not take into account the opportunity cost. Option C, doing everything possible, may not be efficient as individuals and countries have limited resources and time. Option D, doing as little as possible, does not promote production and trade which are crucial for economic growth and development.

To Benefit the Most from Trade, a Person Should