ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Lower prices
|
|
|
Fewer domestic jobs
|
|
|
Decreased resource availability
|
|
|
Decreased dependence on other nations
|
Detailed explanation-1: -Adam Smith said that countries should specialize in the goods and services in which they have an absolute advantage. When countries specialize and trade, they can move beyond their production possibilities frontiers, and are thus able to consume more goods as a result.
Detailed explanation-2: -Specialization refers to the tendency of countries to specialize in certain products which they trade for other goods, rather than producing all consumption goods on their own. Countries produce a surplus of the product in which they specialize and trade it for a different surplus good of another country.
Detailed explanation-3: -Question: Which of the following statements is true about specialization and trade? A country should specialize in and export the good for which it has absolute advantage. A country should specialize in and export the good for which they have comparative advantage.
Detailed explanation-4: -An absolute advantage is when one country can make something at a lower cost than another. Comparative advantage is when a nation can make something at a lower opportunity cost than another.