Country A can product 100 units of Good X in a day and 40 units of Good Y while Country B can produce 50 units of Good X and 40 units of Good Y.
A) These countries will not trade since Country A has a comparative advantage in the production of both goods.
B) These countries will not trade since Country A will always be able to take advantage of Country B.
C) These countries should trade since Country A has a comparative advantage in the production of Good X and Country B has a comparative advantage in the production of Good Y.
D) These countries should trade since Country B has a comparative advantage in the production of Good X and Country A has a comparative advantage in the production of Good Y.

Question

Quizplus · Accepted Answer

Country A has a comparative advantage in producing Good X, while Country B has a comparative advantage in producing Good Y. Therefore, if they specialize in producing the goods they have a comparative advantage in and trade, both countries can benefit by obtaining more of both goods at a lower opportunity cost.

Country a Can Product 100 Units of Good X in a Day