Comparative advantage was once the cornerstone of international trade theory, but today it is archaic, simplistic, and irrelevant for explaining investment choices made by MNEs.

Question

Quizplus · Accepted Answer

Comparative advantage remains a key concept in international trade theory and is relevant for explaining investment choices made by MNEs. It helps to explain why certain countries or regions specialize in particular industries or products, and how MNEs may choose to locate production facilities in areas where they have a comparative advantage. However, it is not the only factor that MNEs consider in their investment decisions, as other factors such as market access, political stability, and labor costs also play a role.

Comparative Advantage Was Once the Cornerstone of International Trade Theory