Which of the following best characterizes the relationshipbetween the parties to a trade and the gains from trade?
A)Gains from trade are fueled by differences in preferences and differences in opportunity costs of production.(True Answer
)Correct
B)Gains from trade are fueled by differences in preferences only.
C)Gains from trade are fueled by differences in opportunity costs of production only.
D)Gains from trade are greatest when there are no differences between the two parties to trade.

Question

Quizplus · Accepted Answer

Gains from trade are fueled by differences in preferences and differences in opportunity costs of production. This means that each party involved in the trade has a competitive advantage in producing a certain good or service, and can exchange that good or service for something that the other party has a competitive advantage in producing. The result is a mutually beneficial exchange that creates value for both parties.

Which of the Following Best Characterizes the Relationshipbetween the Parties