Question

According to the theory of comparative advantage, which of the following statements is true?

1) A nation should produce those goods which it is more efficient at producing than are other nations.
2) A nation can gain from trade if it is equally inefficient in producing two goods.
3) A nation must have an absolute advantage in at least one good to gain from trade.
4) All of the above.
5) None of A, B, or C.

Answer 1

According to the theory of comparative advantage, a nation should produce goods that it is more efficient at producing than other nations.

Step-by-step explanation:

According to the theory of comparative advantage, the true statement is option 1) A nation should produce those goods which it is more efficient at producing than are other nations. Comparative advantage is the ability of a country to produce a good at a lower opportunity cost than another country. This means that even if a country is less efficient in producing all goods compared to other nations, it can still benefit from trade by specializing in the goods it can produce relatively more efficiently.