Which of the following statements about the global marketplace is correct?

• A. The global marketplace eliminates the need for exchange rates.
• B. International trade allows countries to specialize in the production of goods for which they have a comparative advantage.
• C. Trade barriers always increase overall economic welfare.
• D. All countries benefit equally from participating in the global marketplace.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of comparative advantage, which states that countries benefit by specializing in producing goods for which they have a lower opportunity cost compared to other countries.
2. Step 2: Recognize that international trade allows countries to specialize based on their comparative advantage, leading to more efficient global production and mutual gains from trade.
3. Step 3: Analyze why the global marketplace does not eliminate the need for exchange rates; exchange rates are necessary to facilitate trade between countries with different currencies.
4. Step 4: Consider the impact of trade barriers, such as tariffs and quotas, which generally reduce overall economic welfare by limiting trade and causing inefficiencies.
5. Step 5: Understand that while most countries benefit from participating in the global marketplace, the benefits are not always distributed equally due to differences in economic structure, policies, and other factors.