What economic concept explains how countries can benefit from trade by specializing in goods with the lowest opportunity cost?
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Comparative advantage
Developed by David Ricardo in 1817, this theory proves that even if one country is better at producing everything, it still gains by trading with others. It shifts the focus from who is 'best' at a task to who gives up the least to perform it.
Also asked as:
- What principle suggests that trade is beneficial when nations focus on producing goods for which they have the lowest opportunity cost?