Question

How does comparative advantage lead to gains

from trade?

Short answer

They can gain a comparative advantage by following some rules of comparative advantage.

Step-by-step solution

Step 1. Definition

Comparative advantge refers to the situation when an individual, region, or a nation, can produce a certain good at a comparatively lower opportunity cost than others.

Step 2. Explanation

The countries or individuals can gain from comparative advantage when they upgrade their skills and specialize in their comparative advantage. When they do that, their productivity becomes higher and in turn, total production is also higher. And as we know that gains will come when we produce higher than others and from ourselves.