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 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. This means that each country specializes in producing the goods and services that they are relatively better at producing compared to other countries, and then trade with each other to obtain the goods and services that they cannot produce efficiently. The theory does not advocate for each country's citizens to produce only one product (A), compare commodity prices after adjusting for exchange rate differences (B), or claim that no country has an absolute advantage (D).

The Theory of Comparative Advantage