Trade is based on:
A)absolute advantage
B)comparative advantage
C)trade subsidies
D)international free trade agreements

Question

Quizplus · Accepted Answer

Trade is often based on comparative advantage, which refers to the ability of a country to produce a particular good or service at a lower opportunity cost than another country. This creates a situation where both countries can benefit from trade by specializing in the goods or services in which they have a comparative advantage and trading with each other. Absolute advantage, trade subsidies, and international free trade agreements can also influence trade, but comparative advantage is the most fundamental economic principle that underlies the benefits of trade.

Trade Is Based On