People get foreign exchange B. 13. C) all countries can gain from trade if they export goods for which they have a comparative advantage. Suppose that Foreign had been a much larger country, with domestic demand The principle of comparative advantage states that a country has a comparative advantage in producing a good if it produces that good with a lower opportunity cost than the other country. All are advantages of foreign trade EXCEPT: A. 10. The benefits of international trade have been the major … A) all countries can gain from trade if they export goods for which they have an absolute advantage. Countries that engage in international trade benefit from economic growth and a rising standard of living. Successes in one country can influence success in other adjacent countries, which can raise your company's profile in your market niche. the opportunity cost of doing this is the smallest compared with other countries), they can all benefit from trade. Efficiency loss is defined as the loss caused by the tariff in the market, or triangles b + d = 1.25. International trade - International trade - Simplified theory of comparative advantage: For clarity of exposition, the theory of comparative advantage is usually first outlined as though only two countries and only two commodities were involved, although the principles are by no means limited to such cases. c. Output per worker in each firm increases. Since trade allows each country to specialize in what they do best (i.e. 4. Static and dynamic gains from trade. 7. Any two countries could gain from trade thanks to their absolute or comparative advantage in producing some good. The benefits that can be identified with Reference to International Trade are as follows: International trade allows countries to exchange good and services with the use of money as a medium of exchange. Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods. According to the theory of comparative advantage, countries gain from trade because a. e. D) all countries lose from international trade Static Gains means the increase in social welfare as a result of maximized national output due to optimum utilization of country's factor endowments or resources. B) one country can gain from trade only at the expense of another country. Nations compete C. Cheaper goods D. Optimum utilisation of country's resources ANSWER A 14. As a result, the country importing gains by importing cheap goods. This occurs in two ways. All firms can take advantage of cheap labor. Benefits of trade extend beyond the immediate buyers and sellers. If a trade was bad, the countries simply reject it, it is a consensual trade. Differences in opportunity cost allow for gains from trade. When as a result of foreign trade, a country moves from a lower indifference curve to a higher one, it implies that the welfare of the people has increased. First, if the opportunity costs are equal between the two countries, there is nothing to gain from specialization, the countries are identical and there is no benefit from producing the good abroad rather than at home. The terms of trade gain is defined as the additional gain created by the distortion on the market, or rectangle e = 2.5. Cost ratios are different B. b. Both the countries can achieve gains from the trade because the trade is largely based on the principle of comparative advantage. It can also help increase your company's credibility, both abroad and at home. Tariff rates are different C. Price ratios are different D. (a) and (c) of above ANSWER D 15. 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