Question

Classify each statement as true or false by dragging it into the corresponding category.

- When two countries choose to partake in international trade, it is a mutually beneficial activity for both countries.

-Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier.

-Wealthier countries always benefit more from international trade than poorer countries do

- Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments.

Answer 1

The following is the classification of the given statements under the categories of true and false:

• When two countries choose to participate in international trade, it is a mutually beneficial activity for both countries - is a TRUE statement as one country gets cheap goods and the other gets profit and valuable foreign currency.

• Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier - is a TRUE statement as import facilities make it possible to have goods from any part of the world.

• Wealthier countries always benefit more from international trade than poorer countries do - is a FALSE statement as the benefit depends on the profitability of the trade.

• Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments - is a FALSE statement as countries actually choose to trade in commodities that dispense comparative advantage so as to gain more profits.