Even if the United States is more efficient in the production of everything than China, both countries will benefit from their bilateral trade by specializing in what each country can produce relatively more efficiently.This statement is an example of which economic theory?
A)relative cost advantage
B)supply and demand
C)concentric advantage
D)comparative advantage
E)constructive advantage

Question

Quizplus · Accepted Answer

This statement is an example of the theory of comparative advantage, which suggests that even if one country is more efficient in producing all goods compared to another country, both countries can still benefit from trade if they specialize in producing goods for which they have a lower opportunity cost. This theory was developed by David Ricardo in the early 19th century.

Even If the United States Is More Efficient in the Production