The principle of comparative advantage indicates that a. free trade is hardly ever best b....

The principle of comparative advantage indicates that
a. free trade is hardly ever best
b. trade with mutual gain is possible
c. free trade is invariably best
d. free trade is better than some trade?

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Answers (1)

isaaq
3 months ago
Answer
b. trade with mutual gain is possible
The law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. Comparative advantage is the economic reality describing the work gains from trade for individuals, firms, or nations, which arise from differences in their factor endowments or technological progress.[2] In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade.[3] One shouldn't compare the monetary costs of production or even the resource costs (labor needed per unit of output) of production. Instead, one must compare the opportunity costs of producing goods across countries.
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