Which of the Following Statements Is the Best Description of Comparative

question 320

Multiple Choice

Which of the following statements is the best description of comparative advantage?

• A) The best way for a nation to ensure full employment is to be completely self-sufficient and not at all reliant on trading with other nations.
• B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can.
• C) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships.
• D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.

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Definitions:

Profitable Output

The production or output level from a business operation that generates a financial gain or profit.

Firm

An organization engaged in commercial, industrial, or professional activities, typically with the aim of earning a profit.

Long-Run Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied over a period when all factors of production can vary.

Output

Refers to the quantity of goods or services produced in a given time period by a firm or economy.