Which of the following situations would allow agents to gain from specialization and trade with one another?

Choose 1 answer:
(A) The terms of trade are between the two agents' opportunity costs.
(B) The agents have the same opportunity costs.
(c) One agent has absolute advantage in both goods.
(D) One agent has comparative advantage in both goods.
(E) Either agent has absolute advantage in either of the goods.

Question

Which of the following situations would allow agents to gain from specialization and trade with one another?

Choose 1 answer:
(A) The terms of trade are between the two agents' opportunity costs.
(B) The agents have the same opportunity costs.
(c) One agent has absolute advantage in both goods.
(D) One agent has comparative advantage in both goods.
(E) Either agent has absolute advantage in either of the goods.

Accepted Answer

***A*** ∻Key Concept∻ ⚹Terms of Trade⚹ ∻Explanation∻ ⚹Agents can gain from specialization and trade if the terms of trade are between their opportunity costs, allowing each to trade at a rate better than their own cost of production.⚹◊What is the significance of comparative advantage in determining gains from trade between agents?⍭ Generate me a similar question◊

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