When two countries gain from trade:

Question

Quizplus · Accepted Answer

Both countries can specialize in producing the goods they have a comparative advantage in and trade with each other to obtain goods that they cannot produce themselves. This allows them to consume beyond their domestic production possibilities and results in mutual gains from trade. It is not necessary for one country to have an absolute or comparative advantage in producing all goods, and the size of the countries does not necessarily have an impact on their ability to gain from trade.

When Two Countries Gain from Trade