Two parties can capture gains from specialization and trade whenever:
A)One party is twice as good as producing all goods as the other.
B)The opportunity costs of producing each good are the same for both parties.
C)Both parties can produce equal amounts of both goods.
D)None of the above are true.

Question

Two parties can capture gains from specialization and trade whenever:
A)​One party is twice as good as producing all goods as the other.
B)​The opportunity costs of producing each good are the same for both parties.
C)​Both parties can produce equal amounts of both goods.
D)​None of the above are true.

Quizplus · Accepted Answer

The ability for two parties to capture gains from specialization and trade does not depend on one party being twice as good at producing all goods, having the same opportunity costs, or being able to produce equal amounts of goods. It relies on the principle of comparative advantage, where parties benefit from trade if they specialize in producing goods for which they have a lower opportunity cost than their trading partner. None of the options A, B, or C accurately describe this principle.

Two Parties Can Capture Gains from Specialization and Trade Whenever