Use the following to answer questions:
-(Scenario: Countries A and B)Use Scenario: Countries A and B.If countries A and B both specialize and trade:
A) only country A will gain.
B) only country B will gain.
C) country A and country B will gain if they both specialize in the good in which they have a comparative advantage.
D) neither country will gain.

Question

Use the following to answer questions: 
-(Scenario: Countries A and B)Use Scenario: Countries A and B.If countries A and B both specialize and trade:
A) only country A will gain. 
B) only country B will gain. 
C) country A and country B will gain if they both specialize in the good in which they have a comparative advantage. 
D) neither country will gain.

Quizplus · Accepted Answer

When countries specialize and trade based on their comparative advantage, both countries can benefit. By focusing on the production of the good in which they are relatively more efficient, each country can produce more of that good with the same amount of resources than the other country could. By trading, each country can then acquire the other good at a lower cost than it would take to produce it domestically. Therefore, both countries can gain from specialization and trade.

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