Cadmia and Rhodia specialize in the production of electronics and pharmaceutical products respectively. They are considered the best at their specializations. Cadmia trades electronics with Rhodia in exchange for pharmaceutical products. Which perspective is illustrated by this form of trade between Cadmia and Rhodia?
A) product life-cycle theory
B) Heckscher-Ohlin theory
C) absolute advantage
D) mercantilism
E) theory of national competitive advantage

Question

Quizplus · Accepted Answer

This trade illustrates the concept of absolute advantage, where each country specializes in producing goods in which they are most efficient, and then trades with the other to benefit from each other's strengths.

Cadmia and Rhodia Specialize in the Production of Electronics and Pharmaceutical