Question

Answer T for true or F for false.There can be no gains from trade between two countries if one of them has an absolute advantage in the production of all goods. Two individuals can benefit from specialization and trade if they agree upon a price that lies between their opportunity costs of producing the good. When a country opens to trade, people working in industries producing goods that the country exports are harmed by the trade. When two countries decide to engage in specialization and trade, the prices of all goods sold in each country will fall.

Answer 1

Even when one country has an absolute advantage in all products, both countries can gain from trade by focusing on their respective comparative advantages. Specialization and trade are beneficial if the price agreed upon is between the opportunity costs. Trade impacts on industry workers vary and prices adjust differently for export and import goods.

Step-by-step explanation:

Answering the question whether there can be gains from trade between two countries if one of them has an absolute advantage in the production of all goods:

• T for true. There can still be gains from trade through specialization and comparative advantage, despite one country having an absolute advantage in all goods.
• T for true. Two individuals can benefit from specialization and trade if the agreed price lies between their respective opportunity costs.
• F for false. When a country opens to trade, typically people in industries producing export goods benefit due to increased demand, while those in industries competing with imports may be harmed.
• F for false. Prices will not necessarily fall; they may adjust depending on the good. Export good prices may rise while import goods might see a price decrease due to increased competition.

Opening to international trade allows for specialization where countries focus on producing goods for which they have a comparative advantage, leading to increases in global production efficiency and potential gains for all parties involved.

Answer 2

Sentence One: False

Step-by-step explanation:

Absolute advantage does not necessarily trump comparative advantage. Comparative advantage takes into consideration the principle of opportunity cost. The country with the absolute advantage may not be the country with the highest comparative advantage (that is, it is not the country with the least opportunity cost in the production of that same good).

Sentence Two: True

Specialization of trade occurs when countries specialize based on their absolute advantage then trade it with the goods from other countries which they have specialized in the production of same. When two of such countries agree on prices between their opportunity costs of producing the goods, it is usually more beneficial.

Sentence Three: False

Increased exports translate to increased revenue. Increased revenue means more business, the ability of the firms in such industry to retain and pay their workers and even hire more people as their operations expand.

Sentence Four: False

Specialization of trade simply means that a country focuses on improving its efficiency with regard to the production of CERTAIN production, not ALL its products. The fall in price is likely, however, to be seen in the goods in which it specialises in, subject to the laws of demand and supply as well as other economic factors.

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