Country X specializes in producing the goods it produces most efficiently,and Country Y buys the products it produces less efficiently from other countries,even if it could produce the good more efficiently itself.The behavior of these countries can be explained by ____ advantage theory.

Question

Quizplus · Accepted Answer

The given scenario of Country X specializing in producing goods it produces most efficiently, and Country Y buying products it produces less efficiently from other countries, even though it could produce the goods more efficiently itself, is an example of comparative advantage theory. This theory suggests that countries should focus on producing goods and services in which they have a lower opportunity cost or comparative advantage and trade with other countries that have a comparative disadvantage to achieve mutual gains from trade.

Country X Specializes in Producing the Goods It Produces Most