Multiple Choice
The theory of comparative advantage exists because:
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2. Introductory Economic Models
PPF - Comparative Advantage and Trade
Multiple Choice
Why can two countries benefit from trade even if one country is more efficient at producing everything?
A
Because of comparative advantage: each country specializes in the good it can produce at lower opportunity cost and trades to obtain the other good.
B
Because trade forces both countries to have identical production possibility frontiers, eliminating inefficiencies.
C
Because the more efficient country uses its absolute advantage to produce everything cheaper and exports enough to buy all imports, so both benefit.
D
Because by trading, countries can avoid specializing and instead import all goods they don't produce, keeping full diversification.
Related Practice
