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Principle of Comparative Advantage in International Trade

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Principle of Comparative Advantage in International Trade

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Questions and Answers

What is the basis for the Principle of Comparative Advantage in international trade?

Exporting products with the greatest absolute advantage

Importing products with the greatest comparative disadvantage

Exporting products with the least comparative disadvantage (correct)

Importing products with the least absolute advantage

In international trade, a country should export a product if it...

Has the greatest comparative disadvantage in that product (correct)

Wants to increase its import costs

Experiences challenges producing that product

Has an absolute advantage in that product

What should a country do in international trade if it has the least comparative advantage in a particular product?

Export that product

Invest more in producing that product

Avoid trading altogether

Import that product (correct)

Which situation would go against the Principle of Comparative Advantage in international trade?

A country importing products with the greatest absolute advantage Signup and view all the answers

Considering the Principle of Comparative Advantage, what should a country do if it faces challenges producing a certain product?

Shift focus to importing that product Signup and view all the answers

Which type of foreign direct investment involves building a completely new business through a business plan developed by the parent company?

Greenfield Signup and view all the answers

What does assembly involve in the context of manufacturing?

Constructing a finished product from components Signup and view all the answers

In FDI strategies, what does manufacturing encompass?

Producing from raw materials to a finished product Signup and view all the answers

Which type of international acquisition involves acquiring a company that is already in existence?

Acquisition Signup and view all the answers

What distinguishes acquisition from greenfield investment in terms of FDI strategies?

The involvement of parent company's business plan Signup and view all the answers