Question

In 2018, U.S. President Donald Trump argued that his country's trade agreements with other countries were bad for the United States and were unfairly benefiting America's trading partners. What does the theory of the gains from trade have to say about such arguments? In general, the basic theory of the gains from trade O A. suggests that free international trade leads increased consumption possibilities for all countries involved (as long as there are differences in opportunity costs). Free trade cannot be bad for the United States in terms of decreasing American production or consumption possibilities, although the basic theory does not have anything to say about the fairness of how the gains from trade are distributed between or within the countries. OB. guarantees that in comparison to autarky, two countries that trade freely will experience equal gains in consumption possibilities (as long as there are differences in opportunity costs). Free trade cannot be bad for the United States in terms of decreasing American production or consumption possibilities, and it is impossible for free trade to deliver any unfair benefit to any trading partner. O C. suggests that in comparison to autarky, free trade between two countries can lead to decreased production for the country that lacks an absolute advantage. Free trade can be bad for the United States and unfairly benefit its trading partners if its trading partners have an absolute advantage in the goods that the United States currently produces the most of OD suggests that in comparison to autarky, free trade between two countries can lead to decreased production for the country that lacks a comparative advantage. Free trade can be bad for the United States and unfairly benefit its trading partners if its trading partners have a comparative advantage in the goods that the United States currently produces the most of.

Answer 1

Option A

Explanation: Trade theories suggest that both the trading partners can benefit from trade as long as they have differences in opportunity cost of production. However, the distribution of the benefits may not always be equitable.