To explain why some nations purchase products from abroad, even when they have an absolute advantage in production, we have to use the theory of:
A) absolute advantage.
B) relative pricing.
C) comparative advantage.
D) industrial advantage.

Question

Quizplus · Accepted Answer

The theory of comparative advantage explains why a nation may choose to purchase products from abroad, even when they are capable of producing them domestically with an absolute advantage. This theory argues that nations should specialize in producing the goods that they are relatively more efficient at producing and trade with other nations for goods that they are relatively less efficient at producing. By doing so, both nations can benefit from the trade and increase their overall economic welfare.

To Explain Why Some Nations Purchase Products from Abroad, Even