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 supports Palladia's decision to buy wheat from Rhodia?

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Palladia's decision to buy wheat from Rhodia is based on Ricardo's theory of comparative advantage. According to this theory, countries should specialize in producing goods and services that they can produce most efficiently and then trade with other countries for goods and services that they cannot produce efficiently. Palladia is specializing in producing beef because it can produce it more efficiently than any other country. It is buying wheat from Rhodia because even though it can produce wheat more efficiently than Rhodia, it is still less efficient than producing beef. By trading with Rhodia, Palladia is able to maximize its overall production and efficiency.

Palladia Specializes in the Production of Beef and Produces Beef