Chapter 33: Q. 16. (page 804)

Are the gains from international trade more likely to be relatively more important to large or small countries?

Short Answer

Expert verified

International trade benefits the small countries more than the large countries.

Step by step solution

Step 1. Meaning of international trade.

It refers to the exchange of goods and services among people from different nations. Most economists argue that international trade is vital in improving the overall economic performance of a country. When a trader is buying from a trader in another nation, then the exchange is known as importing. Exporting is the selling of products to traders in other countries.

Step 2. Gain from international trading activities are most likely to be relatively more essential to small nationals than large countries.

Because:-

a) The absolute advantage is smaller in small countries and it would be difficult to produce everything the population wants or needs domestically.

b) The benefits of comparative advantage are proportional to the difference between the relative prices in world market and the relative prices that would prevail in home markets without trade.

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Are the gains from international trade more likely to be relatively more important to large or small countries?

Short Answer

Step by step solution

Step 1. Meaning of international trade.

Step 2. Gain from international trading activities are most likely to be relatively more essential to small nationals than large countries.

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