The principle of comparative advantage essentially states that
A) there are some goods for which the opportunity costs of production are the same regardless of who produces them.
B) some goods have high opportunity costs and low absolute costs.
C) specialization can reduce output rather than increase it.
D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good.

Question

Quizplus · Accepted Answer

The principle of comparative advantage states that total output of an economic system is highest when each good is produced by those who have the lowest opportunity cost of producing the good. This means that each country or individual should specialize in producing the goods in which they have a comparative advantage (i.e., the lowest opportunity cost), and trade with others to obtain the goods in which they have a higher opportunity cost. This results in a more efficient use of resources and increased total output. Option A is incorrect because the opportunity costs of production may differ between countries or individuals. Option B is partially correct, but it does not fully capture the principle of comparative advantage. Option C is incorrect because specialization generally results in increased output.

The Principle of Comparative Advantage Essentially States That