The gains from trade are closely related to the difference between the autarky price and the international terms of trade (international price).

Question

Quizplus · Accepted Answer

The gains from trade are based on the lower opportunity cost of production in one country compared to another. However, the difference between the autarky price and the international terms of trade (international price) also affects the gains from trade as it determines the value of what is being traded.

The Gains from Trade Are Closely Related to the Difference