What is trade based on?
A) absolute advantage
B) comparative advantage
C) production costs
D) relative dollar prices

Question

Quizplus · Accepted Answer

Trade is based on comparative advantage, which means that a country produces and exports goods and services for which it has the lowest opportunity cost, and imports goods and services for which it has a higher opportunity cost compared to its trading partners. This allows countries to specialize in what they do best and benefit from their comparative advantages. Absolute advantage, production costs, and relative dollar prices may also affect trade, but comparative advantage is the main determinant of trade patterns.

What Is Trade Based On