If country A exports good X to country B and country B exports good Y to country A, it is most likely that

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Quizplus · Accepted Answer

According to the principle of comparative advantage, countries should specialize in producing and exporting goods in which they have a lower opportunity cost compared to other countries. In this scenario, since country B is exporting good Y to country A, it suggests that country B has a comparative advantage in producing good Y. This does not necessarily imply that country A has an absolute advantage in the production of good X (choice A) or that the opportunity cost of domestic production of good Y for country A is lowered with trade (choice C). The scenario also does not provide enough information to determine whether country B is producing less of good Y than in the no-trade case (choice D).

If Country a Exports Good X to Country B and Country