Nations engage in international trade because of differen...
Nations engage in international trade because of difference in?
Absolute cost
Comparative cost
Fixed cost
Variable cost
Correct answer is B
The principle of comparative cost states that;
international trade takes place between two countries when the ratios of comparative cost of producing goods differ, and each country would specialise in producing that commodity in which it has a comparative advantage.
Comparative cost advantage is when a country produces a good or service for a lower opportunity cost than other countries.
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