In a two-product, two-country world, international trade can lead to increases in
A) consumer welfare only if output of both products is increased.
B) output of both products and consumer welfare in both countries.
C) total production of both products but not consumer welfare in both countries.
D) consumer welfare in both countries but not total production of both products.
E) prices of both goods in both countries.

Question

Quizplus · Accepted Answer

International trade allows countries to specialize in the production of goods in which they have a comparative advantage, leading to increased output and lower prices. This can increase consumer welfare in both countries. Additionally, increased output in both products is possible due to trade, leading to an increase in total production. Therefore, choice (B) is the best answer.

In a Two-Product, Two-Country World, International Trade Can Lead to Increases