Eï¬ciency loss is deï¬ned as the loss caused by the tariï¬ in the market, or triangles b + d = 1.25. Countries that engage in international trade benefit from economic growth and a rising standard of living. 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. Two countries can gain from foreign trade if: A. Static and dynamic gains from trade. This is one of the advantages of international trade that may be difficult to quantify and, therefore, easy to ignore. b. 10. Differences in opportunity cost allow for gains from trade. Any two countries could gain from trade thanks to their absolute or comparative advantage in producing some good. Nations compete C. Cheaper goods D. Optimum utilisation of country's resources ANSWER A 14. To show the static gains from trade, let us take an example â Suppose two commodities, cloth and wheat, are produced in two countries, India and U.S.A., before they enter into trade. A) all countries can gain from trade if they export goods for which they have an absolute advantage. 13. All firms can take advantage of cheap labor. If a trade was bad, the countries simply reject it, it is a consensual trade. Both the countries can achieve gains from the trade because the trade is largely based on the principle of comparative advantage. Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods. the opportunity cost of doing this is the smallest compared with other countries), they can all benefit from trade. D) all countries lose from international trade 9. d. World output can rise when each country specializes in what its does relatively best. This occurs in two ways. Tariff rates are different C. Price ratios are different D. (a) and (c) of above ANSWER D 15. 10. Successes in one country can influence success in other adjacent countries, which can raise your company's profile in your market niche. C) all countries can gain from trade if they export goods for which they have a comparative advantage. 4. 7. 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. Suppose that Foreign had been a much larger country, with domestic demand According to the theory of comparative advantage, countries gain from trade because a. 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. c. Output per worker in each firm increases. The benefits of international trade have been the major ⦠As a result, the country importing gains by importing cheap goods. Since trade allows each country to specialize in what they do best (i.e. All are advantages of foreign trade EXCEPT: A. First, trade gives countries access to physical capital (technology, ⦠The terms of trade gain is deï¬ned as the additional gain created by the distortion on the market, or rectangle e = 2.5. B) one country can gain from trade only at the expense of another country. 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. Benefits of trade extend beyond the immediate buyers and sellers. The gains from trade can be clad into static and dynamic gains from trades. the terms of trade gain. Cost ratios are different B. It can also help increase your company's credibility, both abroad and at home. 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