The gains from international trade increase as
A) a nation consumes inside of its production possibilities schedule.
B) a nation consumes along its production possibilities schedule.
C) the international terms of trade rises above the nation's autarky price.
D) the international terms of trade approaches the nation's autarky price.

Question

Quizplus · Accepted Answer

The gains from international trade are measured by the difference between the autarky price (the price of a good in a closed economy) and the international terms of trade (the price at which a good can be traded on the international market). If the international terms of trade rises above the nation's autarky price, then the nation will benefit from trade and have positive gains from trade. Therefore, choice C is the correct answer.

The Gains from International Trade Increase as