Palladia specializes in the production of beef and produces beef more efficiently than any other country.It buys wheat,which it produces less efficiently than beef,from Rhodia,even though it produces wheat more efficiently than Rhodia.Which of the following theories of international trade support Palladia's decision to buy wheat from Rhodia?

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Quizplus · Accepted Answer

Palladia's decision to buy wheat from Rhodia is based on the principle of comparative advantage proposed by David Ricardo, which states that countries should specialize in producing goods that they can produce more efficiently and trade with other countries to obtain goods they produce less efficiently. In this case, Palladia specializes in producing beef and can produce it more efficiently than any other country, while it produces wheat less efficiently than Rhodia. Thus, it makes economic sense for Palladia to buy wheat from Rhodia and focus on producing beef.

Palladia Specializes in the Production of Beef and Produces Beef