Two countries can gain from foreign trade if ?
Correct answer: D. A and C of above
- A. Cost ratios are different
- B. Tariff rates are different
- C. Price ratios are different
- D. A and C of above
Explanation
Trade creates gains when countries face different opportunity-cost ratios, which produce different relative price ratios and allow comparative advantage. Thus both A and C express the relevant condition.
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