Gains from trade are based on _____ rather than:
A) opportunity cost; specialization.
B) comparative advantage; absolute advantage.
C) absolute advantage; specialization.
D) specialization; comparative advantage.

Question

Quizplus · Accepted Answer

Gains from trade are primarily based on the principle of comparative advantage rather than absolute advantage. This means that even if one country is less efficient at producing all goods compared to another country, there can still be mutual benefits from trading if they specialize in the goods for which they have a lower opportunity cost. Comparative advantage allows for more efficient allocation of resources globally, leading to increased overall production and consumption possibilities for all countries involved.

Gains from Trade Are Based on _____ Rather Than