The Principle of Comparative Advantage Does Not Provide Answers to Certain

question 67

Multiple Choice

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

• A)Do specialization and trade benefit more than one party to a trade?
• B)Is it absolute advantage or comparative advantage that really matters?
• C)How are the gains from trade shared among the parties to a trade?
• D)Is it possible for specialization and trade to increase total output of traded goods?

---

Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded by consumers at various price levels.

Consumer Surplus

The divergence between the aggregate amount consumers are willing and have the means to pay for a good or service, and what they truly pay.

Producer Surplus

The disparity between what sellers are ready to take for a product or service and the actual amount they get.

Minimum Imposed Price

A price floor set by the government or other regulatory body, above the equilibrium price, to prevent prices from falling too low.