Evaluate the following statement. "The nation of Berundi has an absolute disadvantage in the production of everything compared to the United States. Therefore, the United States will have no reason to trade with Berundi"
What will be an ideal response?
This statement is false. The reason is that nations don't trade according to their absolute advantage but rather their comparative advantage. Even though the nation of Berdundi has an absolute disadvantage in the production of everything it is very unlikely that it won't have a comparative advantage in the production of at least one good or service vis-à-vis the United States.
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