How does free trade tend to benefit society?

• A. It prevents any negative environmental impacts from production.
• B. It guarantees equal income distribution among all citizens.
• C. It eliminates all forms of unemployment in participating countries.
• D. It allows countries to specialize in producing goods where they have a comparative advantage, leading to increased overall efficiency and welfare.

Answer: (D)

Verified step by step guidance

1. Understand the concept of comparative advantage, which means that a country can produce certain goods at a lower opportunity cost compared to other countries.
2. Recognize that free trade allows countries to specialize in producing goods where they have a comparative advantage, rather than producing everything themselves.
3. Explain that specialization leads to more efficient allocation of resources, as countries focus on what they do best.
4. Show how increased efficiency from specialization and trade results in higher total output and greater overall welfare for society.
5. Note that while free trade has many benefits, it does not necessarily prevent environmental impacts, guarantee equal income distribution, or eliminate all unemployment.