International trade is based on the:
A)theory of absolute advantage
B)theory of resource advantage
C)theory of comparative advantage
D)theory of military advantage

Question

Quizplus · Accepted Answer

International trade is based on the theory of comparative advantage, which suggests that countries specialize in producing goods and services in which they have a lower opportunity cost and trade with other countries to obtain other goods and services that they can produce at a higher opportunity cost. This specialization and trade result in higher efficiency, productivity, and welfare for all countries involved. The theory of absolute advantage, which suggests that countries should specialize in producing goods in which they are most efficient, does not fully explain the benefits of trade and may result in less efficient outcomes. The theory of resource advantage and military advantage are not relevant to international trade.

International Trade Is Based on The