The theory of comparative advantage supports which of the following assertions?

The theory of comparative advantage supports which of the following assertions?

• A. Free trade promotes global economic growth.
• B. Domestic protectionism is ideal.
• C. Tariffs should be increased.
• D. Only specific countries should engage in trade.

Answer: (A)

The theory of comparative advantage emphasizes that countries should focus on producing goods and services for which they have a relative efficiency advantage, allowing them to trade with others for the goods they do not produce as efficiently. This creates a scenario where all involved parties benefit from trade, as each country can specialize in the production of goods that they can produce at a lower opportunity cost compared to others. When free trade is promoted, it allows countries to exploit their comparative advantages fully, leading to more efficient resource allocation worldwide, greater output, and enhanced economic growth. This ultimately results in increased variety of goods for consumers and lower prices. In contrast, the other options suggest notions that restrict trade or limit economic interaction, which would not be in line with the principles of comparative advantage. Domestic protectionism, increased tariffs, or limiting trade to only specific countries would hinder the benefits that arise from free trade, such as specialization, increased competition, and mutual gains that arise from engaging in trade freely across borders.

The theory of comparative advantage emphasizes that countries should focus on producing goods and services for which they have a relative efficiency advantage, allowing them to trade with others for the goods they do not produce as efficiently. This creates a scenario where all involved parties benefit from trade, as each country can specialize in the production of goods that they can produce at a lower opportunity cost compared to others.

When free trade is promoted, it allows countries to exploit their comparative advantages fully, leading to more efficient resource allocation worldwide, greater output, and enhanced economic growth. This ultimately results in increased variety of goods for consumers and lower prices.

In contrast, the other options suggest notions that restrict trade or limit economic interaction, which would not be in line with the principles of comparative advantage. Domestic protectionism, increased tariffs, or limiting trade to only specific countries would hinder the benefits that arise from free trade, such as specialization, increased competition, and mutual gains that arise from engaging in trade freely across borders.