Question

How does comparative advantage lead to gains from trade between countries?

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Countries can maximize their output levels by focusing on what takes the most time and resources to produce.

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Most countries can produce anything domestically their consumers want without importing any products.

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To create a favorable trade balance, a country with nothing to export can import everything they need.

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Countries can obtain goods and services at a lower relative cost compared to producing those goods or services domestically.

Answer 1

Select {responseValue} Countries can obtain goods and services at a lower relative cost compared to producing those goods or services domestically.

Explanation: Comparative advantage means each country should specialize in producing goods with the lowest opportunity cost and trade for others. That specialization and exchange let countries consume more than they could alone, creating gains from trade.