Answered: Why don’t countries specialize in the…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

Why don’t countries specialize in the production of just a few goods for which they have a comparative advantage?

Group of answer choices

In most cases, resource drains would accompany the continually increasing production of a product specialist.

Doing so would limit innovation in the core industries, because there would be little incentive for it.

Doing so would limit innovation in other industries.

In most cases, increasing opportunity costs would accompany the

continually increasing production of a product specialist.

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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