Practice question · Multiple choice
A country is less productive than its neighbor at everything. What does trade theory conclude?
Hints
- Recall the lawyer who types faster than her assistant.
- Advantage is comparative: measured in forgone alternatives, not output per hour.
Show the answer
B. It gains by specializing where its opportunity cost is lowest
Why
Comparative advantage is guaranteed to exist somewhere: being uniformly worse still leaves you relatively least-bad at something. Both sides expand consumption by trading along those lines.
Practise International Trade
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More questions on International Trade
- Which statements about a trade deficit are correct?
- A country worse at producing everything than its partner still gains from trade. What makes that possible?
- Order the chain from specialization to shared gains.
- Sort each trade barrier by its type.
- Match each group to how a new import tariff affects it.
- A brilliant surgeon types faster than her receptionist and still hires one. Which trade principle is that, in…