While the country of New Zafariland specializes in dairy products, its geographical neighbor, Zwansea specializes in heavy machinery. New Zafariland exports dairy to Zwansea, which in turn exports heavy machinery to New Zafariland. According to the theory of comparative advantage, this mutually beneficialtrade relationship best illustrates

A. a positive-sum game.

B. a zero-sum game.

C. the significance of trade barriers.

D. a first-mover advantage

Question

Erik White

Business

18 July, 15:34

While the country of New Zafariland specializes in dairy products, its geographical neighbor, Zwansea specializes in heavy machinery. New Zafariland exports dairy to Zwansea, which in turn exports heavy machinery to New Zafariland. According to the theory of comparative advantage, this mutually beneficialtrade relationship best illustrates

A. a positive-sum game.

B. a zero-sum game.

C. the significance of trade barriers.

D. a first-mover advantage

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Answers (1)

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Augie · Answer 1

A. A positive sum game

Explanation:

A postive-sum game is a form of game theory whereby the total of gains and losses is greater than zero. The comparative advantage theory by David Ricardo discusses why it is important for countries to specialize in the production of goods and services they have lower opportunity cost in producing and to trade for what they don't produce. This is considered a positive sum of game because countries engaging in comparative advantage wins at no one's expenses. It is mutually beneficial to all party involved.