Question

The theory of comparative advantage _____. a. provides direct policy advice b. was the first theory to incorporate dynamic changes in patterns of trade c. reduces the wealth of the nation in the short run d. explains patterns of trade based on factor endowments

Answer 1

D. explains patterns of trade based on factor endowments

Step-by-step explanation:

Factors of endowments has a similar meaning to factor of productions, which consist of land, workers, materials, and entrepreneurship skills that are owned by a country.

According to the theory of comparative advantage, a country tend to focus their production on things that they can make on a relatively low cost.

The more Relevant materials, workers, skills and land that the country has, the more efficient they are in producing their goods. This will bring the total cost of production down and give them advantage over another country.