The benefits of trade include:
I. greater productivity due to specialization.
II. higher output due to specialization according to comparative advantage.
III. increased welfare when preferences differ.
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

All of the given options are benefits of trade. Specialization allows for countries to produce goods they are most efficient at, resulting in higher productivity and output levels. Trade also allows countries to benefit from comparative advantage, which leads to higher levels of production as well. When preferences differ, trade can also increase overall welfare as individuals can obtain the goods they want at a lower cost. Therefore, all three options are correct and the answer is D.

The Benefits of Trade Include