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Trade will never be beneficial when both parties have a comparative advantage in producing the same good. True or False

User Asumaran
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Final answer:

The statement is false because trade can be beneficial when countries specialize in goods that they can produce at a lower opportunity cost, which is the basis of comparative advantage. A country with an absolute advantage in all goods can still gain from trade by focusing on these principles.

Step-by-step explanation:

The statement that trade will never be beneficial when both parties have a comparative advantage in producing the same good is false. The concept of comparative advantage demonstrates that trade can be beneficial even if one country has an absolute advantage in the production of all goods. This is because the gains from trade arise from each country specializing in the production of goods for which they have the lowest opportunity cost, thereby maximizing efficiency and benefits for all involved parties.

Furthermore, a country benefits from trade by focusing on goods that it can produce at a lower opportunity cost than other countries. This principle holds true even if the country can produce everything more efficiently than its trading partners. Hence, mutually beneficial trade happens when countries specialize based on their comparative advantage and exchange goods accordingly.

User TylerBrinkley
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