Question

The Republic of South Africa exports edible fruits and nuts into the common market known as the European Union, and imports from the European Union other products which South Africa could produce but at a higher cost than what it costs the Europeans to produce. This practice follows the theory of _________.

Answer 1

Comparative Advantage (David Ricardo classical theory of international trade)

Step-by-step explanation:

In an economy in autarky (does not trade with other countries) only goods produced in the country are consumed, while in an economy that trades internationally, excess production can be traded of a good in which there is comparative advantage (better conditions of production of a good) for other goods that are more expensive due to infrastructure issues and other variables to produce in the country.

This theory was developed by David Ricardo (English economist), who founded international trade under the assumption that countries improve their profit and consumption by trading internationally.