The relative advantage in one economic activity that one nation enjoys in comparison with other nations is known as:
A) Theory of comparative advantage
B) Theory of absolute advantage
C) Free-trade advantage
D) Theory of nations advantage

Question

Quizplus · Accepted Answer

The theory of comparative advantage explains how and why countries benefit from trading with one another by specializing in producing goods for which they have a relative efficiency advantage. This concept suggests that even if one nation is less efficient in producing all goods compared to another nation, there can still be mutual benefits from trade if they specialize based on their relative efficiencies.

The Relative Advantage in One Economic Activity That One Nation