Gains from trade can be realized if each country specializes in its comparative advantage good.

Question

Quizplus · Accepted Answer

When each country specializes in producing the good or service in which it has a comparative advantage, trade between the countries can lead to gains in overall production, consumption, and economic welfare. This is known as the principle of comparative advantage, which suggests that countries can benefit from trading with each other as long as they specialize in producing the goods or services for which they have the lowest opportunity cost.

Gains from Trade Can Be Realized If Each Country Specializes