A country that does NOT engage in trade can benefit from trade only if
A) pre-trade and free-trade relative prices are not identical.
B) it employs a unique technology.
C) it has an absolute advantage in at least one good.
D) its wage rate is below the world average.
E) pre-trade and free-trade relative prices are identical.

Question

Quizplus · Accepted Answer

If pre-trade and free-trade relative prices are not identical, then a country that does not engage in trade can benefit from trade by specializing in and exporting the goods in which it has a comparative advantage and importing the goods in which it has a comparative disadvantage. This allows the country to consume a combination of goods that lies outside of its production possibility frontier.

A Country That Does NOT Engage in Trade Can Benefit