Asked by Carley Lambeth on Jul 01, 2024
Verified
The source of gains from trade is _____.
A) tariff revenue
B) self-sufficiency
C) terms of trade
D) absolute advantage
E) comparative advantage
Gains From Trade
The benefit that economies and individuals receive from the voluntary exchange of goods and services beyond what they could produce themselves.
Tariff Revenue
Tariff Revenue is the income generated from duties imposed by a government on imported goods, which is often used as a tool for economic policy.
- Comprehend the concept of comparative advantage and its significance in enhancing global productivity via specialization.
Verified Answer
RA
Raven ArcangelJul 03, 2024
Final Answer :
E
Explanation :
The source of gains from trade is comparative advantage, where countries specialize in producing the goods and services they are relatively most efficient in producing, and trade with each other. This allows for both countries to consume beyond their individual production possibilities frontiers, resulting in gains from trade. Tariff revenue is a possible outcome of trade, but it is not the source of gains from trade. Self-sufficiency leads to limited productivity and higher costs, thus reducing gains from trade. Absolute advantage is when a country is able to produce a good or service more efficiently than another country, but it doesn't necessarily lead to gains from trade as there might not be a good or service of comparative advantage to trade with the other country. Terms of trade are the ratio at which countries exchange goods, but they don't necessarily lead to gains from trade on their own.
Learning Objectives
- Comprehend the concept of comparative advantage and its significance in enhancing global productivity via specialization.
Related questions
An Economy Is Said to Have a Comparative Advantage in ...
(Figure: Comparative Advantage)Use Figure: Comparative Advantage ...
If the Opportunity Cost of Manufacturing Machinery Is Lower in ...
According to the Theory of Comparative Advantage, Specialization and Free ...
Al and Bill Are the Only Workers in a Small ...