Globalization leads to more trade between which of the following groups?

• A. Firms within the same domestic industry
• B. Countries with different comparative advantages
• C. Government agencies in one country
• D. Households in a single nation

Answer: (B)

Verified step by step guidance

1. Understand the concept of globalization: Globalization refers to the process by which countries become more interconnected through increased trade, investment, and cultural exchange.
2. Recall the principle of comparative advantage: This principle states that countries benefit from specializing in producing goods for which they have a lower opportunity cost compared to other countries.
3. Identify the groups involved in increased trade due to globalization: Since globalization encourages countries to specialize and trade based on comparative advantage, the main increase in trade occurs between countries with different comparative advantages.
4. Analyze the other options: Firms within the same domestic industry, government agencies in one country, and households in a single nation do not primarily drive the increased international trade associated with globalization.
5. Conclude that globalization leads to more trade between countries with different comparative advantages, as this is the fundamental economic reason behind increased international trade.