Final answer:
The correct statement is (a), specialization and trade lead to mutual gains for countries. Protectionism ultimately causes higher prices for consumers and can prompt trade wars, which harm industries on both sides. Thus, free trade rather than protectionism is generally more beneficial for a country's economy.
Step-by-step explanation:
Among the options provided, statement (a) that 'specialization and trade leads to mutual gains for countries' is true. Through the process of specializing in products that they can produce more efficiently (comparative advantage), economies of scale, and increased learning, nations can benefit mutually from trade. This leads to more variety of goods for consumers and helps nations to achieve economic gains.
Protectionist policies, contrary to statement (b), often lead to higher prices for consumers and diminish the economic gains that could be achieved through free trade. Statement (c) is incorrect because countries with abundant resources can benefit from trade by exporting surplus goods in exchange for goods they lack. Lastly, statement (d) is incorrect, as having a higher standard of living does not necessarily follow from producing many goods domestically; it often results from engaging in trade that allows consumption beyond the domestic production frontier.
The economic analysis has shown that while protectionism can benefit some domestic industries, it generally causes higher prices for consumers and can lead to retaliatory measures by other nations. This can harm exporters from the protective country. Ultimately, trade policies that emphasize protectionism often involve a trade-off between localized benefits for some industries and generalized costs for the economy.