Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. Group of answer choices True False

Question

Skyler Carlson

Business

29 April, 08:01

Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. Group of answer choices True False

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Answers (1)

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Alfred Medina · Answer 1

True

Explanation:

Both the countries can achieve gains from the trade because the trade is largely based on the principle of comparative advantage. The principle of comparative advantage states that a country has a comparative advantage in producing a good if it produces that good with a lower opportunity cost than the other country.

Trade is not based on the absolute advantage but on the comparative advantage. A country is having a absolute advantage in producing a commodity if it uses the minimum resources than the other country.

It doesn't matter which country has a absolute advantage in a trade.