Are the following statements true or false? Explain in each case.
“Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”
“Certain very talented people have a comparative advantage in everything they do.”
“If a certain trade is good for one person, it can’t be good for the other one.”
“If a certain trade is good for one person, it is always good for the other one.”
“If trade is good for a country, it must be good for everyone in the country.”
1. True. Even if one country has an absolute advantage in the production of all goods, both countries can still benefit from trade if the other country has a comparative advantage in the production of certain goods.
2. False. Comparative advantage is based on the relative cost of production, not on the talent of the individual.
3. False. Trade can be beneficial for both parties involved.
4. False. Trade can be beneficial for one party but not necessarily for the other.
5. False. Trade can be beneficial for a country as a whole, but not necessarily for everyone in the country. Some individuals may benefit more than others.