The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realised when
A) trade occurs and resources are reallocated within the two countries.
B) the two countries continue to produce the same quantities of wheat and coffee.
C) the demand curves in both countries shift inward.
D) each country has an absolute advantage in one of the two commodities.

Question

Quizplus · Accepted Answer

Trade allows countries to specialize in the production of goods for which they have a comparative advantage, leading to more efficient allocation of resources and increased overall production. When resources are reallocated to focus on these areas of comparative advantage, both countries can benefit from trade.

The Gains from Trade That Are Possible When Two Countries