The benefits of trade include: I. higher output due to specialization. II. higher output due 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 three statements are true benefits of trade. Specialization allows for individuals and countries to focus on producing goods and services that they are most efficient at producing, leading to higher output. Comparative advantage allows for countries to specialize in producing goods and services that they have a lower opportunity cost in producing, which also leads to higher output. When preferences differ, trade allows individuals and countries to access goods and services that they may not have been able to produce on their own, increasing overall welfare.

The Benefits of Trade Include: I