Question

According to the theory of comparative advantage:

A. a nation should produce those goods which it is more efficient at producing than are other nations.

B. a nation can gain from trade if it is equally inefficient in producing two goods.

C. a nation must have an absolute advantage in at least one good to gain from trade.

D. all of the above.

E. none of A, B, or C.

Answer 1

Comparative advantage dictates that nations gain from specializing in goods they can produce at a lower opportunity cost, not just those they are most efficient at producing. Therefore, the correct answer to the given question is A.

Step-by-step explanation:

The theory of comparative advantage suggests that a nation should specialize in producing and trading goods that it can produce at a lower relative opportunity cost than other nations, rather than goods in which it has an absolute productivity advantage. Therefore, the correct answer to the given question is A: a nation should produce those goods which it is more efficient at producing than are other nations. This is because comparative advantage takes into consideration not just the efficiency of production but also the opportunity cost associated with producing one good over another. The correct answer to the given question is A.