Question

Look at Table 33.9. Is there a range of trades for which there will be no gains?

Short answer

The role of comparative advantage and opportunity cost is an important factor to determine the gains or no gains from trade.

Step-by-step solution

Step 1. Introduction

The ability to produce a product at a relatively lower cost or to produce a higher quantity at the same cost is known as absolute advantage. While, the ability to produce at a realtively lower opportunity cost is known as competitive advantage. Nations can gain from trade by exporting goods they have a comparative advantage in,

Step 2. Looking at table 20.9

It is clearly understood that United states produce 5000 unit of shoes and Mexico produce 4000 unit of shoes and United states produce 20000 unit of refrigerator and Mexico produce 5000 unit of refrigerator.

Step 3. Meaning of comparative advantage.

Here, 'comparative advantage' plays an important role to determine the terms of trade for exchange under which mutually beneficial trade can occur. Thus, when both countries have higher opportunity cost than they tired to avoid either import of shoes and refrigerator, resulted into no gains from trade.