Question

A situation in which a country specializes in producing the goods it produces most efficiently and buys the products it produces less efficiently from other countries, even if it could produce the good more efficiently itself is referred to as:

Answer 1

A situation in which a country specializes in producing the goods it produces most efficiently and buys the products it produces less efficiently from other countries, even if it could produce the good more efficiently itself is referred to as Ricardo's Theory of Comparative Advantage (1817).

Explanation:

In 1817, David Ricardo introduced the classical hypothesis of comparative advantage, which contributed the reason and advantages of foreign trade to disparities in the relative price of opportunity (cost of certain goods giving up) of generating the same product between nations.

Oil exporting countries, for an instance, have a competitive advantage in chemicals. A regional oil, as opposed to nations without these, offers a cheap source of material for the chemicals. In the system of oil distillery a lot of the raw materials are made. As a consequence, Kuwait, Saudi Arabia and Mexico compete with US chemical manufacturing companies.