When can two countries gain from trading two goods?
Understand the Problem
The question is asking about the conditions under which two countries can benefit from trading two goods. It involves concepts like comparative advantage and the terms of trade that allow for mutual gain in trade.
Answer
When each country has a comparative advantage in producing different goods.
Two countries can gain from trading two goods if each country has a comparative advantage in the production of one of the goods.
Answer for screen readers
Two countries can gain from trading two goods if each country has a comparative advantage in the production of one of the goods.
More Information
Comparative advantage allows countries to specialize in goods they produce more efficiently, leading to mutual benefits from trade.
Tips
A common mistake is to think that trade is only beneficial if one country produces all goods more efficiently than the other. Instead, comparative advantage is key.
Sources
- Comparative Advantage and the Gains from Trade | Microeconomics - courses.lumenlearning.com
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