Which of the following describes the reason for international trade?

Comparative cost advantage is the economic reason countries engage in international trade. It states that a country should specialise in producing and exporting the goods it can make at a relatively lower opportunity cost compared to other goods, even if it is not the most efficient producer of everything, and then trade with other countries for goods that they can produce at a relatively lower cost. This specialisation and exchange allows all trading countries to end up with more total goods than if each tried to produce everything itself.

The other options describe outcomes or measurements related to trade, not the reason it happens. Balance of payment and balance of trade are both records that measure the money flowing in and out of a country from its trade and other transactions; they describe the results of trade, not why it takes place. Absolute cost advantage exists when one country can produce a good more efficiently than another in absolute terms, but it is comparative cost advantage, not absolute advantage, that fully explains why trade remains beneficial even when one country could produce everything more efficiently than its trading partner.

Examination reminder: comparative advantage is about relative opportunity cost between goods within a country, not simply about which country is better overall; this distinction is what separates it from absolute advantage.