For any pair of countries, there is
A) a range of exchange rates that can lead automatically to both countries realizing the gains from specialization and comparative advantage.
B) one single exchange rate that will lead indirectly to one country realizing the gains from specialization and comparative advantage, but not the other country.
C) a range of exchange rates that can lead indirectly to one country realizing the gains from specialization and comparative advantage, but not the other country.
D) one single exchange rate that will lead automatically to both countries realizing the gains from specialization and comparative advantage.

Question

Quizplus · Accepted Answer

The correct answer is A because there is indeed a range of exchange rates that can facilitate both countries in realizing the gains from specialization and comparative advantage. This range allows for the mutual benefit of trade between the two countries, as it accommodates their respective cost structures and competitive positions.

For Any Pair of Countries, There Is