Question

Trade between nations can be mutually beneficial if one country has A) a monopoly. B) an absolute advantage. C) a comparative advantage. D) a protective tariff on imports.

Answer 1

The correct option is C

The model of comparative advantage is one of the basic concepts that underlies the theory of international trade and shows that countries tend to specialize in the production and export of those goods that they manufacture at a relatively lower cost than the rest of the world. those that are comparatively more efficient than others and that tend to import goods in which they are more inefficient and therefore produce with costs that are comparatively higher than the rest of the world.

Answer 2

C) Comparative Advantage.

Further Explanation-

Comparative advantage is one of the basic tenets involved in international trade between nations. The two main components of international trade are ‘import’ and ‘export’. The country exports products that are made within its territory using low cost and local manufacturing processes, at a cost relatively lower than that of the rest of the world, and in exchange for export, they import those specialized goods from countries which cannot be produced by them.It also depends on the availability, requirement and the uniqueness of the product.

Comparative Advantage does not work in a self-sufficient economy, which is extremely rare in this era of globalization. Trade-in this era has to be mutually beneficial, and the goal of mutual gains is advantageous for all countries engaging in international trade the major benefit of a nation having Comparative Advantage is that it contributes to the World Trade, thus appropriating surplus and allowing a greater division of labour. Specialization in a product or a service by a nation essentially widens the base of extension of trade. This means that countries have both ‘production gain and consumption gain’. Comparative advantage broadens a nation’s scope and extent of consumption, the extent of the indigenous product sharing can allow it to have access to resources that benefit its economy and allow it to purchase and expand towards other areas of development. The increasing demand for a particular country’s products leads to an increase in production to meet international demands, which means more appropriation of labour surplus and resource surplus within the home economy.  

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Answer Details-

Grade- High School

Chapter- The basics of International Trade

Subject- Economics

Additional Details- This chapter mentions in detail about the components of international trade,

Keywords-  

Mutual exchange, product, locally produced, indigenous methods, demand, and supply, increase of production.