Comparative Advantage

‹ Comparative Advantage, Specialization, Efficiency, and the PPC

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What does the principle of comparative advantage suggest?

Countries should produce all goods and services themselves to be self-sufficient. Countries should specialize in producing goods and services where they have an absolute advantage. Countries should specialize in producing goods and services where they have a relative advantage. Countries should trade only with other countries that have an absolute advantage in producing certain goods.

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