germany and singapore are countries that trade with each other. if germany has a comparative advantage in…
germany and singapore are countries that trade with each other. if germany has a comparative advantage in cars and singapore has a comparative advantage in shoes, which of the following is a correct statement about the effects of trade between these nations?\n\na. there will be a net loss of employment in singapore\n\nb. germany will lose jobs in the car - industry\n\nc. both countries are likely to be better off, and world production will increase\n\nd. both countries will lose jobs through trade and be worse off
Answer
Brief Explanations:
When countries trade based on comparative - advantage, they specialize in producing goods they can make at a lower opportunity cost. This leads to an increase in world production as resources are used more efficiently. Also, both countries can consume beyond their production - possibility frontiers through trade, making them better off.
Answer:
C. Both countries are likely to be better off, and world production will increase