A product will be traded only if the cost of transporting it between nations is less than the pretrade difference between their relative product prices.

Question

Quizplus · Accepted Answer

This statement reflects the principle of comparative advantage, which states that a country should specialize in producing and exporting goods in which it has a lower opportunity cost compared to other countries. The cost of transportation is a factor that affects the final price of the traded goods, but it is not the only determinant.

A Product Will Be Traded Only If the Cost of Transporting