The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower _______.

Question

Quizplus · Accepted Answer

The theory of comparative advantage, introduced by David Ricardo, explains that countries stand to gain from trade not just by having an absolute cost advantage (producing goods at a lower cost) but more importantly by specializing in producing goods for which they have a lower opportunity cost compared to other countries. This allows for more efficient global production and trade benefits even if one country is more efficient in producing all goods.

The Theory of Comparative Advantage Shows That the Gains from International