The gains from international trade increase as:
A) A nation consumes inside of its production possibilities schedule
B) A nation consumes along its production possibilities schedule
C) The international terms of trade rises above the nation's autarky price
D) The international terms of trade approaches the nation's autarky price

Question

Quizplus · Accepted Answer

The international terms of trade refers to the ratio at which a country can trade its exports for imports from other countries. If the international terms of trade rises above the nation's autarky price (the price at which a good is traded in a closed economy), that means the country can get more imports for a given amount of exports. This leads to gains from trade and an increase in economic welfare.

The Gains from International Trade Increase As