Correct Response: A. The law of comparative advantage is based on the idea that different countries will have different opportunity costs for engaging in an economic activity. Some countries may have a comparative advantage in manufacturing, while others in agriculture, finance, high technology, etc. A multinational corporation that has operations distributed throughout many countries can take advantage of the comparative advantage that each country offers. While the company may generate brand loyalties where they manufacture goods (B), it is more likely that most of the goods produced are for exporting, not domestic consumption. Transportation costs may be reduced in some situations (C), but these cost savings would not be as effective as maximizing comparative advantage across the spectrum of company activities. Assigning tasks to countries with high trade barriers (D) would result in tariffs and other excessive costs, and would not result in a competitive edge.
