The gains from trade are:
A) higher from trade between a rich nation and a poor nation
B) based on different wage rates between nations
C) a result of more efficient resource allocation
D) based on the principle of absolute advantage

Question

Quizplus · Accepted Answer

The gains from trade are a result of more efficient resource allocation. When countries specialize in producing goods and services that they are relatively better at producing, and trade with other countries, they can consume a greater variety and quantity of goods and services at lower prices than if they tried to produce everything themselves. This results in a more efficient allocation of resources and higher overall welfare for both trading partners.

The Gains from Trade Are