Given that countries A and B each specialize in the production of one good and voluntarily
Trade it for the other country's good, then
A) only country A can experience positive gains from trade.
B) only country B can experience positive gains from trade.
C) both countries can experience positive gains from trade.
D) both countries experience negative gains from trade.

Question

Quizplus · Accepted Answer

Both countries can experience positive gains from trade because when they specialize in producing the good in which they have a comparative advantage and trade it with each other, they can produce more efficiently and increase their total output, leading to overall welfare gains for both countries. This is according to the theory of comparative advantage.

Given That Countries a and B Each Specialize in the Production