The concept of comparative advantage indicates that trade exists when
A) there is a desire for trade between companies.
B) there is a relative cost or productivity advantage over other nations producing the same good.
C) the company trading is at a competitive position.
D) there is a lack of trade policy transparency.

Question

Quizplus · Accepted Answer

The concept of comparative advantage suggests that trade exists when there is a relative cost or productivity advantage over other nations producing the same good. This means that countries specialize in producing the goods that they can produce more efficiently, and then trade with other countries for goods that they cannot produce as efficiently. This creates gains from trade for both countries involved.

The Concept of Comparative Advantage Indicates That Trade Exists When