New Zealand is the largest exporter of dairy products to the United States.The United States is the world's third largest supplier of machinery and exports heavy machinery to New Zealand.What explains the trade equation between New Zealand and the United States?

Question

Quizplus · Accepted Answer

The trade equation between New Zealand and the United States can be explained by their absolute advantages in producing certain goods. New Zealand has a comparative advantage in dairy production and exports dairy products to the United States. On the other hand, the United States has a comparative advantage in producing heavy machinery and exports it to New Zealand. This trade is mutually beneficial for both countries as it allows them to specialize in the production of goods they are most efficient at and trade for goods they cannot produce as efficiently. Tariff barriers and first-mover advantages do not play a significant role in explaining this trade equation. The statement about gold and silver is not relevant to this trade equation.

New Zealand Is the Largest Exporter of Dairy Products to the United