How can a nation use opportunity cost to achieve trade benefits according to the concept of comparative advantage?

• A. By exporting goods for which it has the highest opportunity cost.
• B. By avoiding trade to minimize opportunity costs.
• C. By producing all goods domestically regardless of opportunity cost.
• D. By specializing in the production of goods for which it has the lowest opportunity cost and trading for other goods.

Answer: (D)

Verified step by step guidance

1. Understand the concept of opportunity cost: it is the value of the next best alternative foregone when making a choice. In production, it means how much of one good must be given up to produce another good.
2. Learn the principle of comparative advantage: a nation has a comparative advantage in producing a good if it can produce that good at a lower opportunity cost than other nations.
3. Identify the goods for which the nation has the lowest opportunity cost of production. These are the goods the nation should specialize in producing.
4. Specialize in producing those goods with the lowest opportunity cost, which allows the nation to produce more efficiently and increase total output.
5. Engage in trade by exporting the goods in which it has a comparative advantage (lowest opportunity cost) and importing goods that other nations produce at a lower opportunity cost, thereby achieving mutual benefits from trade.