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There is an interesting concept in economics known as the Law of Comparative Advantage.  The CLEP usually asks two questions about it.

There is an interesting concept in economics known as the Law of Comparative Advantage.  The CLEP usually asks two questions about it.

'''''The Law of Comparative Advantage states that if one nation can produce two goods more efficiently than another nation, then the first nation should devote all its resources to producing the more efficient of the two goods and let the other nation produce the second good, and then trade one for the other.'''''  This Law can apply to individuals and firms as well as countries.

'''''The Law of Comparative Advantage states that if one nation can produce two goods more efficiently than another nation, then the first nation should devote all its resources to producing the good that it makes more efficiently and let the other nation produce the second good, and then trade one for the other.'''''  This Law can apply to individuals and firms as well as countries.

Note that this is not what you might first expect.  YOu might expect the first nation to produce BOTH goods, since it can produce both goods more efficiently than the other nation.  But upon closer examination it becomes clear that by focusing on what it does best, and produces more efficiently, the first nation can produce more and then trade for the rest, and be better off.  Put another way, "do what you do best!"

Note that this is not what you might first expect.  YOu might expect the first nation to produce BOTH goods, since it can produce both goods more efficiently than the other nation.  But upon closer examination it becomes clear that by focusing on what it does best, and produces more efficiently, the first nation can produce more and then trade for the rest, and be better off.  Put another way, "do what you do best!"