The basis for free trade is the concept of
A)absolute advantage.
B)differences in natural resources and climate.
C)differences in nominal wages.
D)comparative advantage.

Question

Quizplus · Accepted Answer

Free trade is based on the principle of comparative advantage, which means that countries specialize in producing goods in which they have a lower opportunity cost, and trade with other countries that produce goods in which they have a higher opportunity cost. This allows for more efficient use of resources and can lead to increased productivity and economic growth. Absolute advantage, differences in natural resources and climate, and differences in nominal wages are all factors that can contribute to comparative advantage, but the underlying principle is still comparative advantage.

The Basis for Free Trade Is the Concept of