Countries engaged in international trade specialize in production based on

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International trade is based on the principle of comparative advantage, which means that countries specialize in producing goods and services in which they have a lower opportunity cost compared to other countries. This allows countries to produce and trade goods that they can produce more efficiently, resulting in increased efficiency, lower costs, and increased productivity. The other choices, relative price levels, foreign exchange rates, and transportation costs, are all factors that can affect international trade but are not the main basis for specialization in production.

Countries Engaged in International Trade Specialize in Production Based on