How can a nation that is at an absolute disadvantage gain from trade?

What will be an ideal response?


Being at an absolute disadvantage means that the nation can produce less than its trading partner, but it says nothing about the relative costs of producing the goods. International trade is based on comparative advantage, which means that the low-cost producer specializes in the production of a good and exports it to the other nation that has the higher cost of production. A nation that has an absolute disadvantage still has a lower opportunity cost of production for one of the goods and hence has the comparative advantage in the production of that good. Therefore this country will gain from trade, as will all its trading partners.

Economics

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