Gains from trade
A) occur when one party to the trade has an absolute advantage in both goods.
B) result in being able to consume beyond the trading individuals' production possibilities frontiers.
C) occur when people do not specialize.
D) occur when opportunity costs are equal.
E) always benefit one party but not the other party of any trade.

Question

Quizplus · Accepted Answer

Gains from trade occur when both parties are able to consume beyond their individual production possibilities frontiers. By specializing in producing the goods in which they have a comparative advantage, they can trade with parties who have a comparative advantage in producing other goods, thereby increasing total output and allowing for greater consumption.

Gains from Trade