Practice question · Multiple choice
A country worse at producing everything than its partner still gains from trade. What makes that possible?
Hints
- Ask what each country gives up to produce one more unit of each good.
- Absolute productivity levels do not appear in the comparison.
Show the answer
C. Because gains rest on comparative and not absolute advantage
Why
Opportunity costs, not productivity levels, drive specialisation. Ricardo’s point is precisely that being worse at everything is compatible with being relatively better at something.
Practise International Trade
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More questions on International Trade
- Which statements about a trade deficit are correct?
- Order the chain from specialization to shared gains.
- Sort each trade barrier by its type.
- Match each group to how a new import tariff affects it.
- A country is _less productive than its neighbor at everything_. What does trade theory conclude?
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