Question

the theory of comparative advantage indicates that _____________.

a. countries that participate in international trade will have a higher standard of living
b. international trade will force domestic businesses to lose market share to foreign competitors
c. a limit is placed on the amount of goods and services that can be traded
d. a country should sell to other countries the products it produces most efficiently and buy from other countries the products that it cannot produce as efficiently

Explanation:

The theory of comparative - advantage states that countries should specialize in producing goods and services in which they have a lower opportunity cost (produce most efficiently) and trade for those in which they have a higher opportunity cost (cannot produce as efficiently). Option A is about the standard of living which is not the core of the theory. Option B focuses on the negative impact on domestic businesses which is not the main point. Option C is about trade limits which is not related to comparative - advantage.

Answer:

D. a country should sell to other countries the products it produces most efficiently and buy from other countries the products that it cannot produce as efficiently