Question

Which of the following are benefits of international trade?

Choose one or more answers from the choices shown.

1. A more efficient allocation of resources.

2. A higher level of material well-being.

3. Gains from specialization.

4. Promoting competition.

5. Deterring monopoly.

6. Reducing the threat of war.

Short answer

The correct options are:

1. A more efficient allocation of resources.

2. A higher level of material well-being.

3. Gains from specialization.

4. Promoting competition.

Step-by-step solution

Step 1. Explanation for correct options

Option a is correct as international trade requires efficient allocation of resources, by avoiding wastages and unnecessary costs, which increases profits.

Option b is correct as international trade increases the income of the people engaged in trade and the economy. Thus, it leads to a higher standard of living.

Option c iscorrect as international trade helps countries gain greater consumer and producer surplus by engaging in specialization. There isno wastage of resources;an efficient outcome is obtained.

Option d is correct as it promotes competition. The producer has to stay in the market with rising players. They must develop new technology or differentiated products so that their products are used extensively.

Step 2. Explanation for incorrect options

Option e is incorrect as import and export have some restrictions; it is not possible that trade will remove monopoly. Every country has its trade policy, and if a monopoly market gives a good revenue to the country, then the government would not want it to be dissolved by letting the foreign players take up the market.

Option f is incorrect as war between countries has different political implications.