MC for International Trade

2007-12-20 11:54 am
If there is no comparative advantange in the production of either of the two goods produced by countries 1 and 2, then:

A: the benefits resulting from trade between the two countries are increased.
B: there are no gains from specialization and trade between the two countries.
C: one country must be more productive in producing all goods than the other.
D: each country should specialize in the production of a particular good.
E: non of the above.


explanations are preferred.

回答 (1)

2007-12-20 6:40 pm
✔ 最佳答案
The answer is B.
By definition, the principle of comparative advantage explains how trade is beneficial for all parties involved (countries, regions, individuals and so on), as long as they produce goods with different relative costs. However, since there is no comparative advantage in the production of either of the two goods produced by countries 1 and 2, there should be no gains from specialization and trade between the two countries.
So the following results will not occur:

the benefits resulting from trade between the two countries are increased
one country must be more productive in producing all goods than the other
each country should specialize in the production of a particular good



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