The text has demonstrated that, even if a country's production does not change with the opening of the country to trade, a gain (the "consumption gain") can still occur even though there is no "production gain." Is the reverse situation possible - that is, can there be a "production gain" without there being a "consumption gain" for the country? Why or why not?

Question

Quizplus · Accepted Answer

The Answer is Yes, it is possible for a country to experience a "production gain" without there being a "consumption gain." This could occur if the increased production is not efficiently allocated or if the additional output is not in demand in the domestic or international markets. For example, if a country increases its production of a certain good, but there is no demand for that good domestically or internationally, then there would be a production gain without a corresponding consumption gain. Additionally, if the increased production leads to environmental degradation or other negative externalities, the country may experience a production gain without a consumption gain. In these cases, the increased production may not lead to an improvement in the overall well-being or standard of living for the country's residents.

The Text Has Demonstrated That, Even If a Country's Production