According to standard economic theories, countries that have a comparative advantage in the production of cotton should:

According to standard economic theories, countries that have a comparative advantage in the production of cotton should:

• A. Export cotton, and import other products
• B. Import cotton, and export other products
• C. Export other products and import cotton
• D. Engage in autarky

Answer: (A)

The idea being tested is comparative advantage and how it guides trade. If a country has a comparative advantage in producing cotton, its opportunity cost of cotton is lower than for other goods. That means it can produce cotton more efficiently relative to its alternatives. By specializing in cotton and selling it abroad, the country can generate more overall output and use the proceeds to obtain other goods more cheaply than if it tried to produce everything domestically. So, the sensible path is to export cotton and import the other products it needs. Trading cotton elsewhere leverages the lower opportunity cost, while autarky would forgo the gains from trade.

The idea being tested is comparative advantage and how it guides trade. If a country has a comparative advantage in producing cotton, its opportunity cost of cotton is lower than for other goods. That means it can produce cotton more efficiently relative to its alternatives. By specializing in cotton and selling it abroad, the country can generate more overall output and use the proceeds to obtain other goods more cheaply than if it tried to produce everything domestically. So, the sensible path is to export cotton and import the other products it needs. Trading cotton elsewhere leverages the lower opportunity cost, while autarky would forgo the gains from trade.