Trade between two parties is beneficial because:
A)it ensures that the standard of living in the poorer country matches its trading partner eventually.
B)it enables each to consume a bundle of goods that it cannot produced domestically.
C)it has an immediate effect on an economy by increasing its production set.
D)it allows the economy of both trading partners to grow equally.

Question

Quizplus · Accepted Answer

Trade allows each party to specialize in producing the goods and services that they can do most efficiently, and then exchange them for the goods and services that the other party is specialized in. This enables each party to consume a bundle of goods that they cannot produce domestically, leading to increased efficiency of resource allocation and higher standards of living for both trading partners. The other choices are not necessarily true or are oversimplifications of the benefits of trade.

Trade Between Two Parties Is Beneficial Because