According to the Theory of Comparative Advantage, a Country Gains

question 27

Multiple Choice

According to the theory of comparative advantage, a country gains from foreign trade even though it may have an absolute advantage in the production of all products because ________.

• A)the country will forgo producing its less efficient output in order to produce its more efficient output
• B)workers become more efficient through specialization
• C)economies of scale will reduce cost
• D)there will be more incentive to develop cost-saving technologies

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Definitions:

Perfectly Competitive

Describes a market structure where there are many buyers and sellers, all selling homogeneous products, with no single buyer or seller able to influence the market price.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Certification

The process of officially recognizing someone as having met certain standards, often related to education, skills, or competencies.

Long Run

A time frame where all production elements and expenses can change, providing businesses the flexibility to adapt to market fluctuations.