Which of the following statements best describes the theory of comparative advantage?
A)The best way for a nation to ensure full employment is to be totally self-sufficient rather than relying on other nations to obtain goods and services.
B)Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce efficiently from other nations.
C)The nation that has the largest reserves of gold and other natural resources will enjoy a position of comparative advantage in trade relationships.
D)A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which

Question

Quizplus · Accepted Answer

The theory of comparative advantage advocates that each nation should specialize in producing those goods which it can produce more efficiently and effectively than other nations, and then trade those goods for the goods that it cannot produce efficiently. This will benefit both nations involved in the trade, as they will both be able to obtain goods and services at a lower cost than if they tried to produce everything domestically. The theory is based on the idea that resources are not equally distributed among nations and that specialization and trade will allow countries to access goods and services that they would not be able to produce on their own.

Which of the Following Statements Best Describes the Theory of Comparative