Differences in opportunity costs are the key to mutually beneficial gains from trade.

Question

Quizplus · Accepted Answer

When individuals or countries have different opportunity costs for producing a good or service, it means they can produce certain goods more efficiently or at a lower cost than others. By specializing in the production of goods they have a comparative advantage in and trading with others, individuals or countries can both benefit and increase their overall output and consumption. This is known as the principle of comparative advantage and is the basis for mutually beneficial gains from trade.

Differences in Opportunity Costs Are the Key to Mutually Beneficial