Are the following statements true or false? Explain in each case. a. Two countri

Question

Are the following statements true or false? Explain in each case.

a. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.

b. Certain very talented people have a comparative in everything they do.

c. If a certain trade is good for one person, it can't be good for the other one

d. If a certain trade is good for one person, it is always good for the other one.

e. If trade is good for a country, it must be good for everyone in the country.

I'm having trouble explaining this... Thanks in advance for the help!

Explanation / Answer

Answers:

a. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.

True – Under David Ricardo’s comparative advantage, the two countries would be gain from trade even one country has an absolute advantage. It would be considered the production is based on opportunity cost.

b. Certain very talented people have a comparative in everything they do.

False – The comparative advantage is a comparison of opportunity costs of the production of two goods. For suppose you can comparatively better at producing one good and you can’t be another good, but these opportunity costs are based on each other.

c. If a certain trade is good for one person, it can't be good for the other one

False – Under the theory of comparative advantages, one country has an absolute advantage and another one has not; even it still better off because of comparative advantage.

d. If a certain trade is good for one person, it is always good for the other one.

False – If the trade is good for one country, it always may not good for another country, because the exchange of goods and services should be mutually beneficial for both countries.

e. If a trade is good for a country, it must be good for everyone in the country.

False – if trade is good for a country is not always good for everyone in the country.

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