Given the information in the figure above,Liz ________ benefit from trade with Joe because ________.
A) can; each of them has a comparative advantage in one of the goods
B) can; each of them has an absolute advantage in one of the goods
C) cannot; she has an absolute advantage in both goods
D) cannot; she has a comparative advantage in both goods
E) can; Joe is more productive in producing one of the goods

Question

Quizplus · Accepted Answer

Liz can benefit from trade with Joe because both of them have a comparative advantage in producing one of the goods. Liz has a lower opportunity cost of producing sugar, while Joe has a lower opportunity cost of producing tea. By specializing in the good they have a comparative advantage in, and trading with each other, they can both consume more of both goods and be better off.

Given the Information in the Figure Above,Liz ________ Benefit from Trade