Practice question · Put in order
Order the chain from specialization to shared gains.
- World output of both goods rises
- Each specializes where that cost is lowest
- Both consume beyond their own frontiers
- Each country computes its opportunity costs
- Countries exchange at an agreed ratio
Hints
- Costs must be compared before anyone can specialise.
- The gains appear only after the exchange takes place.
Show the answer
- Each country computes its opportunity costs
- Each specializes where that cost is lowest
- World output of both goods rises
- Countries exchange at an agreed ratio
- Both consume beyond their own frontiers
Why
Compare costs, specialize, produce more together, swap, and both sides end up outside their own PPFs, the whole argument in five steps.
Practise International Trade
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