Under the concept of comparative advantage in the production of cotton, a country should

Under the concept of comparative advantage in the production of cotton, a country should

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

Answer: (A)

The key idea is specialization based on lowest opportunity cost. If a country has a comparative advantage in producing cotton, it can produce cotton more efficiently (with a lower opportunity cost) than other goods. By focusing on cotton and trading for the rest, it can obtain other products more cheaply than if it tried to produce everything itself. This creates gains from trade: the country exports cotton and imports the goods it would be more costly to produce domestically. So, exporting cotton and importing other products is the best approach. Producing all cotton domestically ignores the benefits of trade, importing cotton or embracing autarky eliminates the gains from specialization, and importing cotton would contradict having a comparative advantage in cotton.

The key idea is specialization based on lowest opportunity cost. If a country has a comparative advantage in producing cotton, it can produce cotton more efficiently (with a lower opportunity cost) than other goods. By focusing on cotton and trading for the rest, it can obtain other products more cheaply than if it tried to produce everything itself. This creates gains from trade: the country exports cotton and imports the goods it would be more costly to produce domestically.

So, exporting cotton and importing other products is the best approach. Producing all cotton domestically ignores the benefits of trade, importing cotton or embracing autarky eliminates the gains from specialization, and importing cotton would contradict having a comparative advantage in cotton.