Question

Which of the following is explained by international trade theory?

A. Differences in production costs

B. Differences in levels of technology

C. Foreign exchange rates

D. Differences in efficiency of factor use

E. All of the above

Answer 1

The theory of comparative advantage explains international trade and suggests that trade should occur between economies with large differences in opportunity costs of production. This theory helps to explain differences in production costs, technology levels, the efficiency of factor use, and foreign exchange rates.

Step-by-step explanation:

The theory of comparative advantage explains the concept of international trade. It suggests that trade should occur between economies with large differences in opportunity costs of production. This theory helps to explain differences in production costs, differences in levels of technology, differences in the efficiency of factor use, and even foreign exchange rates. Therefore, the correct answer is E. All of the above.