Gains from trade occur when there are differences in opportunity cost.

Question

Quizplus · Accepted Answer

Gains from trade occur because different individuals, firms or countries have different opportunity costs in producing a particular good or service. By specializing in producing the goods or services they have a comparative advantage in, and trading with others who have a comparative advantage in producing other goods or services, all parties can benefit and achieve a higher level of total output and consumption than they would have otherwise.

Gains from Trade Occur When There Are Differences in Opportunity