Which statement about opportunity costs is true in the context of trade?

Which statement about opportunity costs is true in the context of trade?

• A. Comparative Advantage Arises Because Producers Face Different Opportunity Costs.
• B. All Countries Have The Same Opportunity Costs.
• C. Opportunity Cost Is Irrelevant To Trade Decisions.
• D. Trade Reduces Opportunity Costs To Zero.

Answer: (A)

Opportunity costs vary across producers, and this difference creates a basis for trade. When a country can produce a good at a lower opportunity cost than another country, it has a comparative advantage in that good and benefits from specializing in it and trading. That’s why the statement is true: comparative advantage arises because producers face different opportunity costs, which explains why trade can make both sides better off. The other ideas don’t fit because if all countries faced the same opportunity costs, there’d be no gain from trade; if opportunity cost weren’t relevant, trade wouldn’t depend on relative efficiencies; and trade doesn’t eliminate opportunity costs—it changes how they’re allocated and can increase overall welfare through specialization and exchange.

Opportunity costs vary across producers, and this difference creates a basis for trade. When a country can produce a good at a lower opportunity cost than another country, it has a comparative advantage in that good and benefits from specializing in it and trading. That’s why the statement is true: comparative advantage arises because producers face different opportunity costs, which explains why trade can make both sides better off.

The other ideas don’t fit because if all countries faced the same opportunity costs, there’d be no gain from trade; if opportunity cost weren’t relevant, trade wouldn’t depend on relative efficiencies; and trade doesn’t eliminate opportunity costs—it changes how they’re allocated and can increase overall welfare through specialization and exchange.