Absent any trade, a country's residents either can produce 1,000 laptop computers and 500 computer servers per week, or can produce 750 laptop computers and 750 computer servers per week. After trade takes place, its residents either can consume both 1,000 laptop computers and 600 computer servers, or can consume both 850 laptop computers and 750 computer servers. These outcomes represent:

Question

Quizplus · Accepted Answer

The fact that residents can consume more of both goods after trade indicates an increase in total output, which represents gains from international trade. Both countries have a comparative advantage in one of the goods, and trade allows them to specialize in producing the good in which they have the comparative advantage and trade for the other good.

Absent Any Trade, a Country's Residents Either Can Produce 1,000