Given free trade,small nations tend to benefit the most from trade since they:
A) Are more productive than their large trading partners
B) Are less productive than their large trading partners
C) Have demand preferences and income levels lower than their large trading partners
D) Enjoy terms of trade lying near the opportunity costs of their large trading partners

Question

Quizplus · Accepted Answer

Small nations tend to have a comparative advantage in a few select industries based on their abundant resources or specialized skills which allows them to produce goods efficiently at a lower opportunity cost than their larger trading partners. This means their terms of trade are likely to be favorable and closer to their opportunity costs, giving them an advantage in trade.

Given Free Trade,small Nations Tend to Benefit the Most from Trade