Which Option Best Explains Why Countries Trade With Each Other

In general countries trade with each other because of an economic concept known as comparative advantage. They have different comparative advantages.

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International trade increases the variety of goods and services available in a country.

. Economies of scale refer to a production process in which production costs fall as the scale of production rises. A reason that countries trade with each other is a. Countries rely on each other for chances to import.

Countries trade with each other when on their own they do not have the resources or capacity to satisfy their own needs and wants. Price of the commodity in home country P 2 is lower than the price P 1 in the foreign country in the absence of international trade P 1 P 2. Countries rely on each other for chances to export.

Different factor endowments some economies are rich in natural resources while others have relatively little. The existence of economies of scale in production is sufficient to generate advantageous trade between two countries. According to the law of comparative advantage a country should focus on specialize in producing and exporting resources which it can produce at the least opportunity cost and import the resources for which it is a high cost-producer.

Reasons for international trade. It shows that the gains from international trade result from pursuing comparative advantage and producing at a lower opportunity cost. A Explain the reasons why countries trade with each other.

Let us now turn our attention to the reasons why countries need to trade with other countries. Trade among nations is taken as a sign of good intent and a means of maintaining non-hostile diplomatic relations. Countries rely on each other for an employment base.

Reason for Trade 4. Enough talk about international trade. There are many reasons why a country is unable to produce some products efficiently.

Trade enables economies to specialise in the export of some resources and earn revenue to pay for imports of other goods. If the domestic price of wheat is lower than the world price then Country A becomes an exporter of wheat seeing that domestic wheat producers take advantage of the increased. Clear evidence of trading over.

To get products they cannot produce. By developing and exploiting their domestic scarce resources countries can produce a surplus and trade this for. By developing and exploiting their domestic scarce resources countries can produce a surplus and trade this for the resources they need.

Countries rely on each other for new industries. Incorrect technology. Countries trade with each other when on their own they do not have the resources or capacity to satisfy their own needs and wants.

2 David Ricardos model which provided an explanation of why nations trade was based on. Trade is used to empower allied nations by providing them with valued resources such as oil grain or bullets as well as crippling and weakening rivals by imposing economic sanctions on goods services. Existence of Economies of Scale in Production.

To help their neighbors. Because different nations have different natural resources and human capabilities trade has become a popular method of allowing nations to get the products people need such as when the United States exports goods like wheat and corn to Japan and imports goods like computers and cars from Japan. If trade takes place and the price is agreed as P 0 there is excess demand A 1 B 1 for this commodity.

To determine whether or not Country A should trade with other countries the domestic price of wheat should be compared to that of other countries commonly known as the world price. True Answer Correct population. To sell goods they do not need.

Countries rely on each other for vital resources. Suppose workers in Transylvania can produce only two goodsyo-yos or sweatsocks. The reason is the principle of comparative advantage which says that each country should specialize in the products that it can produce most readily and cheaply and trade those products for goods that foreign countries can produce most readily and cheaply.

Increased welfare specialisation where countries have a. There are several reasons why countries trade with one another. Countries rely on each other for cheaper products.

As can be seen from the explanation above the general reason why countries need to trade with other countries is in order to obtain what they need from the other countries. Thus the price differential P 1 P 2 creates the possibility of trade between the two countries. To share excess resources.

The theory of comparative advantage explains why countries trade. This specialization ensures greater product availability and lower prices. In the given question the best sentence that describe the concept of why countries trade with each other is option D i-e countries trade with each other in order to obtain the goods that they are unable to produce efficiently in their own country.

If the Transylvanian currency is the daler then the opportunity cost of producing yo-yos is measured in terms of _____. Why Do Countries Trade With Each Other.

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