00:02
Let's go through each statement.
00:05
There can be no gains from trade between two countries if one of them has an absolute advantage in the production of all goods.
00:11
That is false.
00:14
Because gains from trade can still occur even if one country has an absolute advantage in the production of all goods.
00:19
Absolute advantage refers to the ability of a country to produce a good more efficiently or at a lower cost compared to another country.
00:26
But even if one country has an absolute advantage in all goods, there can still be differences in opportunity costs and comparative advantages which determine the potential gains from trade.
00:35
Comparative advantage determines the gains from specialization in trade.
00:39
That is true.
00:41
Comparative advantage refers to a country's ability to produce a good at a lower opportunity cost compared to another country.
00:47
When countries specialize in producing the goods for which they have comparative advantage in engaging trade, they can maximize their overall production and consumption, leading to gains from trade.
00:58
If a certain trade is good for one country, it can't be good for another country.
01:01
That is false...