Many of the toy products sold in Canada are imported from Taiwan because the Taiwanese can produce these products more effectively and efficiently than we can in Canada.This is an example of:
A)a bilateral free trade agreement.
B)a multilateral resource priority.
C)the theory of absolute advantage.
D)the theory of comparative advantage.

Question

Quizplus · Accepted Answer

This scenario reflects the concept of comparative advantage, which suggests that countries should specialize in producing goods that they can produce more efficiently than other countries, even if they do not have an absolute advantage in producing any goods. In this case, Taiwan has a comparative advantage in producing toys, so it makes sense for Canada to import them rather than trying to produce them domestically.

Many of the Toy Products Sold in Canada Are Imported