Firm-based theories of international trade are best at explaining trade in all of the following types of products except ________.

Question

Quizplus · Accepted Answer

Firm-based theories, such as the theory of comparative advantage, are able to explain trade in products that vary in terms of their production costs between different countries. This means that the theory can explain trade in products that are produced by different firms in different countries, but it cannot explain trade in products that are produced by the same firm in different countries, such as aluminum which is often produced by a small number of large multinational corporations.

Firm-Based Theories of International Trade Are Best at Explaining Trade