The improvement in outcomes that occurs when specialized producers exchange goods and services is called:
A) gains from trade.
B) absolute advantage.
C) comparative advantage.
D) specialization.

Question

Quizplus · Accepted Answer

Gains from trade refers to the increase in overall efficiency, productivity, and economic welfare that occurs when specialized producers exchange goods and services. Through specialization, each producer can focus on their comparative advantage and produce goods at a lower opportunity cost, while also benefiting from the goods produced by others with different comparative advantages. This results in a more efficient allocation of resources, which leads to overall higher economic welfare.

The Improvement in Outcomes That Occurs When Specialized Producers Exchange