What is the source of the gains from trade?
What will be an ideal response?
As long as people have different opportunity costs of producing goods or services, total output is higher with specialization and trade than if each individual produced goods and services under self-sufficiency. This increase in output is the gains from trade.
You might also like to view...
Futures contracts are marked-to-market
A) every day. B) every week. C) every month. D) every quarter.
Suppose China can produce either 300 telephones or 200 DVD players, and Japan can produce either 200 telephones or 100 DVD players. Implicitly, Japan has
A. A comparative but not necessarily an absolute advantage in telephones. B. An absolute but not necessarily a comparative advantage in telephones. C. Neither a comparative nor an absolute advantage in telephones. D. Both an absolute and a comparative advantage in telephones.
In pure competition, the average revenue of a firm always equals:
A. total revenue. B. average total cost. C. marginal cost. D. marginal revenue.
The largest category of gross domestic income is
A. interest. B. wages. C. profits. D. rent.