The Theory of Comparative Advantage Implies Which of the Following

question 16

Multiple Choice

The theory of comparative advantage implies which of the following?

• A) A country with an absolute advantage in a good will necessarily have a comparative advantage in that good.
• B) The gains to trade are exactly offset by the losses from trade.
• C) Workers in an industry in which the United States does not have a comparative advantage will be hurt if the United States reduces barriers to trade.
• D) There are gains to trade for a country as long as that country has a comparative advantage in producing the goods that it imports and exports.

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Definitions:

International Trade

The exchange of goods, services, and capital across international borders, driven by comparative advantages and benefiting parties through increased choice and efficiency.

Autarky Price

The price of a good in a country under the condition of autarky, where the country does not engage in international trade.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision or choosing to undertake one action over another.

Computer

An electronic device capable of performing calculations and tasks according to a set of instructions called programs.