The theory of comparative advantage:
A) Claims that economic well-being is enhanced if each country's citizens produce only a single product
B) Claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged all countries
C) Claims that economic well-being is enhanced if each country's citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries, and then trade production
D) Claims that no country has an absolute advantage over another country in the production of any good or service

Question

Quizplus · Accepted Answer

The theory of comparative advantage states that countries should specialize in producing goods that they have a comparative advantage in producing relative to other countries, and then trade with each other to enhance economic well-being. This is based on the idea that even if one country is absolutely more efficient in producing every good, it can still benefit from trade by focusing on producing and exporting goods in which it has the strongest comparative advantage.

The Theory of Comparative Advantage