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Chapter 19: Q 16. (page 462)

Are the gains from international trade more likely

to be relatively more important to large or small

countries?

Short Answer

Expert verified

Trade gains are relatively more important to small countries.

Step by step solution

01

Step 1. Definition

The exchange of capital, goods, and services across international borders or territories is referred to international trade.

02

Step 2. Explanation

Gains from international trade are more likely to be relatively more important to small countries. This is because small countries are not self-reliant and they have minimum room for specialization and fewer economies of scale. As large countries have large internal markets that鈥檚 why they have room for more specialization and have greater economies of scale but small countries don鈥檛 have this.

In smaller countries, there are no big internal markets and limited firms producing specialized products so smaller countries have no comparative advantage over bigger countries.

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