If the foreign import demand curve intersects the home country's export supply curve in its horizontal portion, then:
A) the home country will suffer a loss from international trade.
B) the home country will not gain from trade.
C) the home country will gain from trade.
D) the foreign country will not gain from trade.

Question

Quizplus · Accepted Answer

When the foreign import demand curve intersects the home country's export supply curve in its horizontal portion, it means that the home country can supply an infinite amount of goods at a given price. This indicates that the home country has a comparative advantage in producing the goods. Therefore, the home country will gain from trade by exporting the goods to the foreign country. However, the foreign country will not gain from trade as it has to import the goods at a higher price. Hence, the correct answer is B - the home country will not gain from trade.

If the Foreign Import Demand Curve Intersects the Home Country's