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Question: Which of the following are benefits of international trade? 1) A higher level of material...

Question: Which of the following are benefits of international trade?

1) A higher level of material well-being. 2) Gains from specialization. 3) Promoting competition. 4) Reducing the threat of war. 5) Deterring monopoly. 6) A more efficient allocation of resources.

Solutions

Expert Solution

International Trade can be defined as the Trade of domestic country with the countries of the world.

1. With the International trade a higher level of material well-being is achived. Hence it can be said that international trade leads to  a higher level of material well-being because more choice is available with the international trade.

2.Since due to international trade a country produces only those goods and services in which it has comparative advantage. So due to comparative advantage both trading countries gains specialisation. Hence it can be said that international trade leads gains from specialisation.

3.

Since due to international trade goods and services are free to move everywhere, so the place where same good is sold at higher price, due to international trade, the producer of another country are forced to reduce their price. Hence in this way this leads to more competition.

4.

Since due to International trade two or more countries have aggrement about the trade, so the possibility of war reduces between the trading countries. Hence it can be said that international trade reduces the threat of war.

5.

Since international trade create competition, so monopoly will not arise. Hence it can be said that international trade deter monopoly.

6. Since due to international trade the country which has comparattive advantage in any goods produces only that goods and all country do the same. So in this way the possibility of international trade arises. Hence in this way international trade leads to a more efficient allocation of resources.

Hence it can be said that all these given benefits are due to international trade.

Hence all are the benefits are due to international trade.


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