According to international trade theory, a country should: A. import goods in which it has an absolute advantage. B. import goods in which it has a comparative disadvantage. C. export goods in which it has an absolute advantage. D. import goods in which it has an absolute disadvantage.

Question

Social Studies

Holland

29 May, 19:13

According to international trade theory, a country should: A. import goods in which it has an absolute advantage. B. import goods in which it has a comparative disadvantage. C. export goods in which it has an absolute advantage. D. import goods in which it has an absolute disadvantage.

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Answers (1)

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Kayley Roman · Answer 1

B. import goods in which it has a comparative disadvantage.

Explanation:

According to the Factor Proportions Theory, the supply and demand of a country determine the cost of any factor or resource. When there is a great supply of some factor in comparison with its demand, this factor will be cheaper and vice-versa. So, if some factors are in great supply (cheaper products), a country will export goods based on them, and if some factors are in short supply (products with a higher demand), a country will import goods based on them.