According to the theory of comparative advantages, countries are to specialize based on their
Absolute cost advantages
Absolute cost disadvantages
Comparative cost advantages
Comparative cost disadvantages
The availability of labour
Correct answer is C
The theory of comparative advantage states that if countries specialise in producing goods where they have a lower opportunity cost – then there will be an increase in economic welfare.
The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.