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 - Page 17: 5

Answer

Trade is not about competition between countries resulting in 'winners' and 'losers' because trade makes all countries better off. For example, trade between the United States and China isn't care for a games challenge in which one side successes and the opposite side loses. Actually, the inverse is valid: Trade between two nations can improve every nation off. To perceive any reason why, consider how trade influences your family. At the point when an individual from your family searches for work, she contends with individuals from different families who are searching for occupations. Families likewise go up against each other when they go shopping in light of the fact that every family needs to purchase the best products at the most minimal costs. In a sense, every family in an economy rivals every single other family. Notwithstanding this challenge, your family would not be in an ideal situation disengaging itself from every other family. On the off chance that it did, your family would need to develop its own nourishment, make its possess garments, and manufacture its own home. Plainly, your family increases much from its ability to exchange with others

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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