Which term refers to the relationship in which two countries can produce more goods from the same resources if each specializes in the goods it produces most efficiently at home and the two trade these goods internationally?

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Quizplus · Accepted Answer

The term that refers to the described relationship is comparative advantage. This theory was developed by economist David Ricardo and suggests that even if one country is more efficient in producing all goods than another country, both countries could still benefit from trade if they specialize in producing the goods they have a comparative advantage in and then trade with each other. This allows both countries to produce more goods overall and to trade for goods they do not produce as efficiently.

Which Term Refers to the Relationship in Which Two Countries