A country that does not engage in trade can benefit from trade only if
A) pre-trade and free-trade relative prices are not identical.
B) it employs a unique technology.
C) it has an absolute advantage in at least one good.
D) its wage rate is below the world average.
E) pre-trade and free-trade relative prices are identical.

Question

Quizplus · Accepted Answer

If pre-trade and free-trade relative prices are not identical, then a country that does not engage in trade can benefit from trade by importing goods that are relatively cheaper in the world market and exporting goods that are relatively more expensive in the world market. This will lead to an increase in welfare and a higher standard of living for the country.

A Country That Does Not Engage in Trade Can Benefit