Final answer:
a) The country's absolute advantage. Trade between countries can still be beneficial even when one country has an absolute advantage in all products because gains from trade arise from specializing according to comparative advantage, not solely from absolute efficiency.
Step-by-step explanation:
Understanding trade between countries involves examining concepts such as a country’s absolute advantage, the ability for countries to consume beyond their production possibility frontier, and the principle of mutually beneficial exchange. When one country has an absolute advantage in producing all goods, it implies that they can produce more efficiently than others. However, gains from trade are not solely based on absolute advantage but rather on comparative advantage.
High-income countries, despite their ability to produce all products more efficiently due to factors like advanced technology and educated workers, should still engage in trade. This is because they can specialize in producing goods for which they have a comparative advantage—those goods for which the opportunity cost of production is lowest compared to other goods they can produce. Consequently, even a country with absolute advantage in all goods can still reap the benefits of trade by focusing on what they can produce at the lowest relative cost.
This specialization allows for increased efficiency and production volumes, which in turn enable countries to trade the excess production. Other countries, by also specializing in their respective areas of comparative advantage, can trade their surplus, enabling both parties to enjoy a variety of goods and services at potentially lower costs than if they attempted to produce everything domestically.