Question

In the​ 1950s, the economist Bela Balassa compared 28 manufacturing industries in the United States and Britain. In every one of the 28​ industries, Balassa found that the United States had an absolute advantageLOADING.... In these​ circumstances, would there have been any gain to the United States from importing any of these products from​ Britain? Explain. A. Since the United States had an absolute advantage in all 28​ industries, it also had a comparative advantage in each industry and would not have gained anything from importing any of these products from Britain. B. Even with an absolute​ advantage, the United States would have benefited from importing those products for which Britain had the same opportunity cost. C. Since the United States had an absolute advantage in all 28​ industries, it had more bargaining power and would have gained from importing all of these products from Britain. D. Even with an absolute​ advantage, the United States would have benefited from importing those products for which Britain had a comparative advantage. E. Even with an absolute​ advantage, the United States would have benefited from importing those products that Britain could have produced at lower total cost.

Answer 1

Answer:

D) Even with an absolute​ advantage, the United States would have benefited from importing those products for which Britain had a comparative advantage.

Explanation:

The basis for foreign trade are comparative advantages, not absolute advantages. You must remember that in order for trade to be effective and long lasting, both sides must benefit from it, not just one side.

Resources are limited, and that applies to everyone, to every corporation and to every country. You might have an absolute advantage at producing everything, but your production possibilities frontier sets you a limit on what products or combination of products you can produce. Sometimes it might be beneficial to trade and receive some products that you could produce more efficiently, but their opportunity costs might be too high. Probably you can get them at lower costs from foreign suppliers and use those resources for producing something else.