Which of the following statements is the best description of comparative advantage?
A) The best way for a nation to ensure full employment is to be completely self-sufficient and not at all reliant on trading with other nations.
B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can.
C) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships.
D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.

Question

Which of the following statements is the best description of comparative advantage?
A) The best way for a nation to ensure full employment is to be completely self-sufficient and not at all reliant on trading with other nations.
B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can.
C) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships.
D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.

Quizplus · Accepted Answer

The theory of comparative advantage is the guiding principle supporting free trade. It states that each nation should produce and export the goods it produces more effectively or efficiently than other nations and should import the goods produced more efficiently by other nations.

Which of the Following Statements Is the Best Description of Comparative