Most theories dealing with the principle of comparative advantage explain the patterns of international trade to be caused by differences in
A) income levels
B) interest rates
C) demand conditions
D) supply conditions

Question

Quizplus · Accepted Answer

The principle of comparative advantage suggests that countries specialize in producing goods and services in which they have lower opportunity costs and trade with countries that specialize in producing goods and services in which they have higher opportunity costs. This specialization and trade are determined by differences in supply conditions, such as natural resources, labor force skills, and technology. Therefore, the best choice is D, supply conditions.

Most Theories Dealing with the Principle of Comparative Advantage Explain