The theory of comparative advantage is:
A) rarely relevant for identifying whether gains from trade can be obtained.
B) always relevant for identifying whether gains from trade can be obtained.
C) not true for nations, though it may be true for individuals.
D) true for nations, but is not true for business or individuals.

Question

Quizplus · Accepted Answer

The theory of comparative advantage is a fundamental concept in international trade that is always relevant for identifying whether gains from trade can be obtained. It states that countries should specialize in producing goods and services that they can produce at a lower cost than their trading partners, and then trade for products with higher opportunity costs. This allows for all countries to benefit from trade and increase their overall economic welfare.

The Theory of Comparative Advantage Is