Gains from trade are largest when two parties are similar in terms of opportunity costs of production.

Question

Quizplus · Accepted Answer

Gains from trade are largest when two parties are different in terms of opportunity costs of production. If they have similar opportunity costs, then there may not be much to gain from trading with each other. It is the differences in opportunity costs that allow for specialization and greater gains from trade.

Gains from Trade Are Largest When Two Parties Are Similar