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What Is Written Here Is Not Investment Advice. It has been published on this page to explain the terminology used with explanations about the stock market, digital currencies, economy, finance and investment instruments.

🔍What are the comparative advantage and gains from trading?

 Comparative advantage means that a country or region can produce a good or service at a lower opportunity cost than another country or region. Gains from trade mean that countries or regions that have a comparative advantage increase their overall welfare by exchanging goods or services with each other.

For example, country A can produce both wheat and wine, but it expends less resources to produce wheat. Country B can also produce both wheat and wine, but it takes less resources to produce wine. In this case, country A has a comparative advantage in wheat and country B in wine. If country A sells its wheat to country B and country B sells its wine to country A, both countries can obtain more goods or services. This is called the profit from trade.


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