Question

Classify the statements as true or false. a. The process of specialization and trade has positive net benefits and is, therefore, beneficial to everyone. b. A nation will not have a comparative advantage in a product if it does not also have an absolute advantage in the production of that good. c. It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another. d. Countries specialize in the production of goods for which they have a comparative advantage. e. Absolute advantage is the source of the potential gains from specialization and trade.

Answer 1

The process of specialization and trade has positive net benefits and is, therefore, beneficial to everyone. This statement is false.

A nation will not have a comparative advantage in a product if it does not also have an absolute advantage in the production of that good. This statement is True.

It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another. This statement is True.

Countries specialize in the production of goods for which they have a comparative advantage. e. Absolute advantage is the source of the potential gains from specialization and trade. This statement is True.

What is trade?

• Transferring products and services from one person or institution to another includes trade, frequently in exchange for cash.
• A system or network that permits trading is referred to as a market by economists.
• Bartering was a primitive type of trade in which commodities and services were directly exchanged for other goods and services. 
• Barter is the practice of exchanging goods without using cash.

Learn more about trade here:

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