Question

Economic studies on the theory of comparative advantage have

		Only used one data source
		Confirmed that the theory works
		Had very mixed results in supporting the theory
		Been unable to provide support for the theory

Answer 1

The correct option is B) Confirmed that the theory works.

Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than in other countries. The theory of comparative advantage states that if countries specialize in producing goods where they have a lower opportunity cost – then there will be an increase in economic welfare.

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