AP Macroeconomics Question 55: Answer and Explanation

Test Information

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Question: 55

5. Which of the following must exist to allow for mutual benefit from specialization and trade between two countries?

  • A. Comparative advantage in the production of a good or service
  • B. Absolute advantage in the production of a good or service
  • C. Increasing marginal returns in production
  • D. Absolute and comparative advantage in the production of a good or service
  • E. Absolute advantage and increasing marginal returns in production

Correct Answer: A

Explanation:

A Neither an absolute advantage nor increasing marginal returns in the production of a good are necessary to allow mutual benefit from specialization and trade. The opportunity for two countries to benefit from specialization and trade rests only on the existence of a comparative advantage in the production of a good or service.