Praxis II Citizenship

Answer: D - A country with a comparative advantage usually benefits from specializing in the production of a product if they already have an advantage in that product market. If two countries have different opportunity cost ratios, they can achieve a mutually beneficial trade arrangement by specializing in the production of a certain good. For example, imagine that France produces 100 units of wine and 50 units of apple pie each year, while the United States produces 50 units of wine and 100 units of apple pie. At those production rates, the countries would have different opportunity cost ratios. Therefore, they would benefit from specializing in the production of the good in which they already have an advantage. Instead of producing 150 units of merchandise each year (wine + pie), France could specialize in wine production while the U.S. specializes in pie production. As a result, each country would yield 200 units of merchandise a year, which is 25 percent more product than before.