Question

Comparative Advantage Theory in International Trade :

a. Focuses on nations specializing in the production of goods with the lowest opportunity cost.
b. Emphasizes efficiency gains through trade by exploiting differences in production capabilities.
c. Stresses mutual benefits for countries engaging in trade due to specialization.
d. Supports the idea that even if a country is less efficient in producing all goods, trade can still be advantageous.

Answer 1

Comparative advantage in international trade indicates that nations gain from specializing in goods with the lowest opportunity cost, leading to mutual benefits through efficient trade, even if a nation is less efficient in producing all goods.

Step-by-step explanation:

The comparative advantage theory in international trade posits that nations benefit when they specialize in producing goods for which they have the lowest opportunity cost, which typically leads to efficiency gains through trade. This principle suggests that by exploiting differences in production capabilities, countries can enjoy mutual benefits from trade, focusing on where they have an edge over others. Even if a nation is not absolutely efficient in producing all sorts of goods, it can still gain from trade by focusing on goods where it has a comparative advantage. For instance, half of the United States' trade is with countries like Japan, Canada, and Mexico, highlighting how significant geographic proximity and opportunity costs are in shaping global trade patterns.