Final answer:
Gains from voluntary trade arise because it reallocates goods between individuals in a way that both parties prefer, which is a central concept in economics. It is supported by the ability of private markets to efficiently determine the distribution of goods and by the principle of comparative advantage in international trade. Therefore, the correct answer is option D. It reallocates goods between individuals in a way they both prefer
Step-by-step explanation:
The gains from voluntary trade arise not simply because it occurs in a market, nor because of power, but rather because it reallocates goods between individuals in a way they both prefer. This is a fundamental concept in economics, as private markets like the cell phone industry efficiently facilitate the exchange between buyers and sellers to determine what goods are produced and who receives them. The principle of voluntary exchange asserts that it benefits both parties involved. However, in situations where a voluntary exchange impacts a third party who is neither the buyer nor the seller, this principle faces challenges due to potential externalities.
International trade, as guided by the principle of comparative advantage, improves global consumption by allowing nations to acquire goods and services they could not produce on their own. This expands the range of possibilities beyond what a country's production possibilities curve would allow. Yet, it's important to recognize the trade-offs between incentives and economic equality in a society. While trade can potentially increase both equality and economic output in certain circumstances, aggressive pushes for equality may reduce economic output.
Proponents of free-market economics advocate that market forces of supply and demand should operate without government intervention, creating an efficient marketplace environment. Currency facilitates this trade by serving as a common unit of exchange that eliminates the need to physically carry goods for the purpose of trade.