The law of comparative advantage provides the basic rationale for free trade-all countries, even those with an absolute disadvantage, can gain from trade.

Question

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The law of comparative advantage states that even if a country has an absolute disadvantage in producing all goods, it can still benefit from trade by specializing in and exporting the goods in which it has a comparative advantage, and importing goods in which other countries have a comparative advantage. Thus, it provides the basic rationale for free trade.

The Law of Comparative Advantage Provides the Basic Rationale for Free