Final answer:
If a country's Terms of Trade are closer to its relative price ratio, it gains more from trade due to greater efficiencies in production and consumption. Gains from trade also occur through intra-industry trade and specialization within the value chain.
Step-by-step explanation:
If the world price ratio, also referred to as the Terms of Trade, is closer to a country's relative price ratio, then the country gains more from trade. This concept is a fundamental aspect of international economics. The gain from trade occurs when a country can consume more than it can produce as a result of specialization and trade, benefitting from the efficiencies garnered through comparative advantage.
Even if a country has an absolute advantage in producing all products—implying it can produce these goods using fewer resources than another country—it can still benefit from trade by specializing in goods where it has the greatest efficiency or comparative advantage. This allows for an increase in overall consumption and economic welfare.
Intra-industry trade and the concept of splitting up the value chain further enable countries to benefit from trade by focusing on specific stages of production where they hold a comparative advantage or are more efficient, enhancing the gains from international trade.