It can be shown that differences in before-trade relative prices will determine:
A) which nation has the absolute advantage.
B) which good each nation will export or import.
C) the quantity traded by each nation.
D) the equilibrium trade price.

Question

Quizplus · Accepted Answer

Before-trade relative prices will determine which good each nation will export or import. If a nation has a lower relative price for a particular good than another nation, it will export that good and import the other good. This is known as comparative advantage.

It Can Be Shown That Differences in Before-Trade Relative Prices