Which of the following is a comparative advantage strength?
A) It defeats mercantilism, at least intellectually.
B) It provides direct policy advice.
C) It explains patterns of trade based on factor endowments.
D) It positively incorporates the role of governments in trade.

Question

Quizplus · Accepted Answer

Comparative advantage theory explains patterns of trade based on factor endowments, meaning that countries produce and export what they are relatively best at producing compared to other countries due to their unique resources and capabilities. This allows for mutually beneficial trade and specialization, leading to increased efficiency and higher overall welfare. Comparative advantage theory explains patterns of trade based on each country's factor endowments, such as labor, capital, and natural resources. This means that countries can specialize in producing goods in which they have a comparative advantage, leading to mutually beneficial trade. This is a strength of comparative advantage theory as it provides an explanation for why countries trade with each other.

Which of the Following Is a Comparative Advantage Strength