Question 28
International TradeComparative cost doctrine of international trade means specialization in production
- A.according to absolute cost advantage
- B.according to absolute cost disadvantage
- C.according to comparative cost disadvantage
- D.according to comparative cost advantage
Show the answer and explanation
Answer: D (according to comparative cost advantage)
Explanation
The comparative cost theory says each country should specialise in the goods it produces at the lowest opportunity cost, i.e. where it has a comparative cost advantage.