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 domestic demand is comparatively weak.

Question

Quizplus · Accepted Answer

The theory of comparative advantage states that each nation should specialize in producing and exporting those goods that it can produce more efficiently and effectively than other nations, and import goods that other nations can produce more efficiently and effectively. This leads to greater efficiency, better allocation of resources, and increased global trade. Options A, C, and D do not accurately describe the theory of comparative advantage.

Which of the Following Statements Best Describes the Theory of Comparative