Consider the United States' production of soy beans and running shoes.If the United States has an absolute advantage in the production of both goods compared to China,
A)only China can gain from trade.
B)both countries can gain from trade.
C)only the United States will be able to operate beyond its PPF.
D)only the United States can gain from trade.
E)each country will be able to produce at a point beyond its PPF.

Question

Quizplus · Accepted Answer

Even though the United States has an absolute advantage in the production of both goods, both countries can still gain from trade by specializing in the good that it has a comparative advantage in and trading with the other country. This will allow both countries to consume more of both goods than they could produce on their own, leading to overall gains from trade. Therefore, both countries can gain from trade.

Consider the United States' Production of Soy Beans and Running