Why does it make sense for economies to specialize according to comparative advantage and trade?
What will be an ideal response?
A person has a comparative advantage in an activity that they can perform at a lower opportunity cost than other people. By participating in the activity in which they have a comparative advantage, less is given up. Because resources are scarce, more can be produced with available resources when less is given up. And, by trading people can consume more than just what they produce.
You might also like to view...
Income inequality is indicated by a Lorenz curve that:
a. bows up, away from the line of income equality. b. bows down, away from the line of income equality. c. lies parallel to the line of income equality. d. coincides with the line of income equality. e. approaches the vertical axis.
The less foreigners demand U.S. products:
a. the more of their currencies they will supply in exchange for U.S. dollars. b. the more of their currencies they will demand in exchange for U.S. dollars. c. the less of their currencies they will supply in exchange for U.S. dollars. d. the less of their currencies they will demand in exchange for U.S. dollars.