Which of the following is TRUE about comparative advantage?
A) Comparative advantage explains trade among nations, but not within nations.
B) Comparative advantage explains trade within nations, but not among nations.
C) Comparative advantage explains trade within nations and among nations.
D) Comparative advantage has nothing to do with trade among nations; it only is concerned with specialization within a firm.

Question

Quizplus · Accepted Answer

Comparative advantage explains why countries specialize in producing certain goods or services and then trade with other countries to increase overall economic welfare. However, it also applies to trade within a country, as different regions or individuals may have different advantages in producing certain goods or services. Therefore, option C is the correct answer. Option A and D are incorrect as they make false statements, and option B is incorrect because it erroneously claims that comparative advantage only applies to trade within nations.

Which of the Following Is TRUE About Comparative Advantage