Anonymous asked in Social ScienceEconomics · 1 month ago

Why don't countries specialize in trades where they have absolute advantage? ?

I mean if you can produce anything in the world cheaper than other countries, wouldn't it be logical to produce it to sell to other countries and make a lot of money, just like China is doing. I mean I really don't get why Economists say that you should just specialize in what you have a comparative advantage?

3 Answers

  • Oiy
    Lv 6
    1 month ago

    No one wii buy its products. Where should the dollar come from?

  • JuanB
    Lv 7
    1 month ago

    1) To diversify your economy

    2) To avoid dependency on individual product cycles

    3) Just because you have absolute advantages, it doesn't mean all you means of production are suitable in there.  Example you have orange farms and corn farms.  If you have absolute advantage in oranges, does not mean your corn farms can efficiently grow corn, nor does it make sense to plow under the corn fields and only grow oranges.

  • 1 month ago

    Because there is a basic rule set by reality. In order to sell a product you first need to define a need within the market place and then fill it. Even innovation of new products follows this rule. To make a product that there is no need or demand for is pointless. If you are going to compete against others that are going by that rule you may or may not have an advantage.Thus the concept that a country should only specialize in what they have a comparative advantage in.  It is a totally logical conclusion that is based upon the reality of the situation.

Still have questions? Get answers by asking now.