If a country has an absolute advantage in both items when compared to another country, there can never be any benefit for them to trade.

Question

Quizplus · Accepted Answer

This statement is false. Even if a country has an absolute advantage in both items, there can still be benefits to trade. Specialization and division of labor can allow for increased efficiency and productivity, leading to an overall increase in economic output and potentially leading to a higher standard of living for both countries involved in the trade. Additionally, even if one country has an absolute advantage in both items, they may still prefer to trade in order to diversify their economy and reduce the risk of relying too heavily on one particular product or industry.

If a Country Has an Absolute Advantage in Both Items