The theory of comparative advantage states that:
A) Productivity rises more quickly when countries produce goods and services for which they have a natural talent.
B) Countries that produce guns have an advantage over countries that produce butter.
C) All countries start out on an equal playing field.
D) Countries that operate under a policy of isolationism have a comparative advantage.

Question

Quizplus · Accepted Answer

The theory of comparative advantage holds that countries will benefit from specializing in the production of goods and services for which they are relatively more productive. This allows them to produce more output with fewer resources, leading to increased efficiency and economic gains. It does not suggest that all countries start out on an equal playing field, nor does it advocate for isolationism or prioritize the production of certain goods over others based on military advantage.

The Theory of Comparative Advantage States That