ECON: MACRO4
ECON: MACRO4
4th Edition
ISBN: 9781305436862
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 17, Problem 1.1PA
To determine

Reasons for experiencing gains from trade even if neither county has a comparative advantage

Introduction:

Comparative Advantage: The ability of the nations to produce goods at a lower opportunity cost than other nations is termed as Comparative Advantage

Expert Solution & Answer
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Explanation of Solution

Even ifneither of the countries has a comparative advantage, the trade increases the variety of goods and services available for consumers to choose from. Further, it helps to keep the domestic prices in check as the goods and services are imported from other countries are sold at the world prices. This will further lead to the more consumption and will help to boost the economic growth of the county. It also helps to keep the nations connected to the world economy. Also, it helps in the exchange of cultures and values.

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