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# Comparative Advantage Principle

## Definition

The economic principle that nations should specialize in producing goods where they have relative efficiency advantages and trade for other goods, rather than attempting self-sufficiency. This principle guides optimal international trade patterns.

## Source Chapter

Book IV, Chapter 2

## Context

Smith argues that nations should specialize in producing goods where they have natural advantages and trade for other goods, rather than attempting to produce everything domestically. This principle underlies his critique of protectionist trade policies.

## Economic Domain

Exchange

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