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The Republic of South Africa exports edible fruits and nuts into the common market known as the European Union, and imports from the European Union other products which South Africa could produce but at a higher cost than what it costs the Europeans to produce. This practice follows the premise of _________________.

1. The Theory of Competitive Positioning
2. The Theory of Absolute Advantage
3. The Theory of Malthus
4. The Theory of Comparative Advantage

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Answer:

4. The Theory of Comparative Advantage

Explanation:

The theory of comparative advantage implies that nations will partake in trade with each other, exporting goods which have a comparative productivity advantage. The theory was first proposed by David Ricardo in 1817.