Question

Society gains advantages through trade because of its ability to: (Can be all of the above)

A. refine tasks associated with production.

B.attain absolute advantage in our trade with other nations.

C. specialize resources to the uses where opportunity cost is minimized.

Answer 1

Comparative advantage: The law of comparative advantage proposed by a classical economist explains that an economy will produce a maximum of the good for which the relative opportunity cost is low. The low opportunity cost implies that the economic agent would give up the least number of units of another good to produce one extra unit of the good in which it has a comparative advantage.

Following the comparative advantage, an economy specializes in the production of a good with low opportunity cost and produce a maximum of such good. In order to produce a maximum of that good, economy employs all its resources in the production of that good and segregate the different tasks of production.

Hence, the correct options are A and C.