Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Question

Quizplus · Accepted Answer

According to Adam Smith's theory of absolute advantage, a country should specialize in producing goods that it can produce at a lower opportunity cost than other countries. In this situation, if Country B can produce product X at a cheaper rate, it means that it has an absolute advantage in producing this product. Therefore, it is more efficient for Country A to import product X from Country B rather than producing it domestically.

Country a Can Produce Product X, but It Can Also