Comparative advantage differs from absolute advantage in that the former ________, whereas the latter ________.
A)holds that countries should specialize their production; does not
B)holds that trade should be kept as nearly in balance as possible; says countries should seek a favorable balance of trade
C)bases trade on natural advantages; bases trade on acquired advantage
D)states that there is a basis of trade even if one country can produce everything more efficiently than another country; does not deal with this issue

Question

Quizplus · Accepted Answer

Comparative advantage explains why it can be beneficial for countries to trade even if one country can produce all goods more efficiently than another, by focusing on the relative efficiency of producing goods. Absolute advantage simply identifies which country can produce a good more efficiently without considering the relative efficiency of producing different goods.

Comparative Advantage Differs from Absolute Advantage in That the Former