When can two countries gain from trading two goods?
A)when the first country can only produce the first good and the second country can only produce the second good
B)when the first country can produce both goods,but can only produce the second good at great cost,and the second country can produce both goods,but can only produce the first good at great cost
C)when the first country is better at producing both goods and the second country is worse at producing both goods
D)Two countries could gain from trading two goods under all of the above conditions.

Question

Quizplus · Accepted Answer

Two countries can gain from trading two goods under any of the given conditions. If one country is better at producing one good and the other country is better at producing another good, then they can trade and benefit from each other's specialization. If one country can produce both goods but at a higher cost than the other country, then they can also benefit from trade by focusing on producing the good in which they have a comparative advantage. Finally, if one country is simply better at producing both goods, then they can still benefit from trade if they specialize in producing the good in which they have the greatest advantage and trade with the other country for the good in which they have a comparative disadvantage.

When Can Two Countries Gain from Trading Two Goods