The United States exports a good if its no-trade U.S.price is ________ its world price.With international trade,U.S.production of the good ________ compared to the level of no-trade production.

Question

Quizplus · Accepted Answer

The law of comparative advantage states that a country should specialize and export a good in which it has a lower opportunity cost compared to its trading partner. Therefore, if the U.S. exports a good, it means that it has a comparative advantage in producing that good, resulting in a lower world price compared to the no-trade U.S. price. This means that the answer cannot be A or D. As for B, if the U.S. exports the good, it would lead to an increase in production as the country can take advantage of the economies of scale and increase efficiency. Therefore, the answer is C.

The United States Exports a Good If Its No-Trade U