The Principle of Comparative Advantage Indicates That Mutually Beneficial International

question 5

Multiple Choice

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

• A)tariffs are eliminated.
• B)transportation costs are almost zero.
• C)relative costs of production differ between nations.
• D)a country can produce more of some product than other nations can.

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Definitions:

Rational Self-interest

The principle that individuals tend to make decisions that result in the most personal benefit.

Satisfying Wants

Fulfilling the desires or needs of consumers, often a goal for businesses to meet through the production of goods and services.

Income

A broader term that encompasses money received on a regular basis from work, property, investments, or welfare payments.

Opportunity Costs

The cost of an alternative that must be forgone in order to pursue a certain action; the benefits you could have received by taking an alternative action.