In a two-product, two-country world, international trade can lead to increases in
A) consumer welfare only if output of both products is increased.
B) output of both products and consumer welfare in both countries.
C) total production of both products, but not consumer welfare in both countries.
D) consumer welfare in both countries, but not total production of both products.

Question

Quizplus · Accepted Answer

International trade can lead to gains in both productivity and consumer welfare in both countries involved. This is because international trade allows for specialization and comparative advantage, leading to increased efficiency and output in both products. As a result, this can lead to lower prices and increased availability of goods, which benefits consumers in both countries.

In a Two-Product, Two-Country World, International Trade Can Lead to Increases