Question:
According to the theory of Comparative Advantage, a country gains from trade if it specializes in the production of goods for which it has:
(1) The absolute advantage.
(2) A higher opportunity cost.
(3) A lower opportunity cost.
(4) A higher labor productivity.
(5) More natural resources.
Correct Answer:
(3)
Answer Explanation:
Comparative advantage is based on opportunity cost. A country should produce the good where it gives up less of other goods to produce it, compared to its trading partner. This maximizes global efficiency.
Topic: International Trade Year: 2024
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