Question

David Ricardo's Theory of Comparative Advantage explains why countries that enjoy an absolute advantage in making certain goods can still prefer to purchase these products from other countries. T/F

Answer 1

The answer is true. Even when a country has an absolute advantage in producing certain goods, it can still prefer to purchase those products from other countries because of the theory of comparative advantage.

Step-by-step explanation:

The answer is true. David Ricardo's Theory of Comparative Advantage explains that even when a country has an absolute advantage in producing certain goods, it can still prefer to purchase those products from other countries. This is because trade is based on mutually beneficial exchange and gains from trade come from specializing in one's comparative advantage. Comparative advantage is the ability to produce a good or service at a lower opportunity cost than other countries.