Which of the following statements is true?

Question

Quizplus · Accepted Answer

The principle of comparative advantage establishes that trade will happen when two nations have different opportunity costs of producing a good. It provides a range of prices within which trade will occur, as countries will specialize in the production of the good in which they possess a comparative advantage and trade it for other goods in which they have a higher opportunity cost of producing. The principle of absolute advantage, on the other hand, presumes that a country can produce more goods and services compared to other nations and use this advantage to determine the terms of trade. However, this does not necessarily guarantee trade will occur or bring about the same benefits as comparative advantage.

Which of the Following Statements Is True