The theory of comparative advantage posits productivity rises most when countries specialize in producing goods for which they have a:

• A. No comparative advantage
• B. A natural talent
• C. The highest taxes
• D. The same as neighboring countries

Answer: (B)

The key idea is that gains from trade come when a country focuses on producing goods where it can do so more efficiently than others, meaning it has a lower opportunity cost. That efficiency often comes from natural endowments or inherent strengths—the country has a natural talent for certain goods, so it can produce them with relatively less sacrifice of other outputs. By specializing in those goods and trading for others, overall production rises, boosting productivity for all involved.

If a country had no comparative advantage, there’d be little incentive to specialize and trade; high taxes blunt incentives and can reduce output; and if all countries produced the same way, there’d be no relative efficiency difference to exploit through trade. So the option that best fits how comparative advantage works is the presence of a natural talent that gives a productivity edge in certain goods.