Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 1 - Part I - Ten Principles of Economics - Questions for Review: 5

Answer

Trade is not about competition between countries resulting in 'winners' and 'losers' because trade makes all countries better off.

Work Step by Step

Trade allows countries to specialize in the production of goods they have a comparative advantage in, meaning that a country should only produce a specific good that it has a low opportunity cost in. If this is the case, each country will export the good they specialize in and import goods they do not specialize in. In this way, through specialization, all countries are strictly better off if they engage in trade.
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