Which of the following describes the reason for international trade
-
A.
Balance of payment -
B.
Comparative cost advantage -
C.
Absolute cost advantage -
D.
Balance of trade
Correct Answer: Option B
Explanation
Comparative advantage is an economic term that refers to an economy’s ability to produce goods and services at a lower opportunity cost than that of trade partners. Countries mainly enter into international trade to buy goods and services that they would normally produce at a higher cost compared to buying it from another country that is producing it a relatively low cost