To achieve gains from trade,a country
A) needs to have an absolute advantage in the production of all goods.
B) specializes in the producing a good in which it has a lower opportunity cost.
C) must produce at a point beyond its PPF.
D) should produce at the midpoint of its PPF.
E) needs to have an absolute advantage in the production of at least one good.

Question

Quizplus · Accepted Answer

Gains from trade occur when countries specialize in producing goods in which they have a comparative advantage (i.e. lower opportunity cost). This allows them to produce more efficiently and ultimately trade for goods they cannot produce as efficiently. Having an absolute advantage in all goods is not necessary for gaining from trade. Producing beyond the PPF is not possible and producing at the midpoint does not take into account comparative advantage.

To Achieve Gains from Trade,a Country