Question

Country a specializes in the production of copper and produces it more efficiently than any other country. It buys wheat, which it produces less efficiently than copper, from country b, even though it produces wheat more efficiently than country b. Which theory of international trade supports country a’s decision to buy wheat from country b?.

Answer 1

The choice of country a to purchase wheat from country b is supported by Ricardo's theory of comparative advantage, which is the theory of international commerce.

What is the trade theory of Ricardo?

Three premises underlie the Ricardian theory of international trade: labor productivities are fixed, there is no cross-border movement of the production factors, and labor is the only production factor. Only the first of these presumptions is acknowledged by Ricardo himself.

According to Ricardo's well-known theory of comparative advantage, countries can gain a competitive advantage in international trade by focusing on producing goods with the lowest opportunity costs compared to those of other countries.

What can we infer about the advantages of free trade from Ricardo's theory of comparative advantage?

The foundation of international trade is comparative advantage, which also serves as the basis for the positive economic effects of free trade on nations. According to the comparative advantage concept, trade can still be advantageous to both trading partners even when one country has a clear advantage in producing goods.

Learn more about Ricardo's theory of comparative advantage: brainly.com/question/14015888

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