The principle of comparative advantage states that countries should specialize in producing the goods that they can produce more efficiently or at a lower opportunity cost than other countries. Opportunity cost refers to the cost of forgoing the production of one good in order to produce another good.

For example, if Country A can produce both cars and computers more efficiently than Country B, it may still be more advantageous for Country A to focus on producing cars and trade with Country B for computers. This is because, even though Country A has an absolute advantage in producing both goods, it still has a comparative advantage in producing cars, as the opportunity cost of producing cars is lower for Country A than it is for Country B.

By specializing in the production of the goods in which they have a comparative advantage, countries can produce more of both goods and achieve higher levels of economic welfare. This principle is a fundamental basis for international trade and has been a key driver of globalization.