The theory of comparative advantage is:
A) rarely relevant for identifying whether gains from trade can be obtained.
B) always relevant for identifying whether gains from trade can be obtained.
C) not true for nations, though it may be true for individuals.
D) true for nations, but it is not true for business or individuals.

Question

Quizplus · Accepted Answer

The theory of comparative advantage is always relevant for identifying whether gains from trade can be obtained. This theory explains how nations can benefit from specializing in the production of goods and services that they are relatively better at producing, while importing goods and services that they are relatively worse at producing. By doing so, nations can increase their total output and consumption, and enjoy gains from trade. This theory has been widely tested and applied in many real-world situations, and has been found to be a useful tool for understanding patterns of trade and economic growth.

The Theory of Comparative Advantage Is