Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. Group of answer choices True False

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Business

Clarence

12 January, 01:03

Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. Group of answer choices True False

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Answers (1)

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Allison Washington · Answer 1

True

Explanation:

Both the countries can achieve gains from the trade because the trade is largely based on the principle of comparative advantage. The principle of comparative advantage states that a country has a comparative advantage in producing a good if it produces that good with a lower opportunity cost than the other country.

Trade is not based on the absolute advantage but on the comparative advantage. A country is having a absolute advantage in producing a commodity if it uses the minimum resources than the other country.

It doesn't matter which country has a absolute advantage in a trade.