Question

To sum up international trade theory, we can say that the primary reason for trade is:

A. the increase in OPEC oil prices.

B. governments want to accumulate money.

C. the existence of price differentials among nations.

D. the creation of new nations from former colonies.

E. none of the above.

Answer 1

The primary reason for trade is the existence of price differentials among nations. Trade allows countries to consume combinations of goods and services that they are unable to produce on their own, thanks to the principle of comparative advantage.

Step-by-step explanation:

The primary reason for trade is the existence of price differentials among nations. Trade allows countries to consume combinations of goods and services that they are unable to produce on their own, thanks to the principle of comparative advantage. For example, if Saudi Arabia could receive more than one bushel of corn for four barrels of oil, it would be better off financially.