One advantage of free trade is:

• A. It ensures that all countries have identical levels of economic development.
• B. It eliminates the need for international exchange rates.
• C. It allows countries to specialize in the production of goods where they have a comparative advantage.
• D. It guarantees that all domestic industries will grow without competition.

Answer: (C)

Verified step by step guidance

1. Understand the concept of comparative advantage: It means that a country can produce a good 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, leading to more efficient global production.
3. Note that specialization and trade enable countries to consume beyond their own production possibilities, increasing overall economic welfare.
4. Identify that free trade does not ensure identical economic development levels across countries, nor does it eliminate exchange rates or guarantee growth for all domestic industries.
5. Conclude that the key advantage of free trade is specialization based on comparative advantage, which improves efficiency and benefits all trading partners.