Problems and Applications Q9 Indicate whether each of the following statements is true or false. Statement True False 1. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. 2. Certain very talented people have a comparative advantage in everything they do. 3. If a certain trade is good for one person, it can't be good for the other one. 4. If a certain trade is good for one person, it is always good for the other one. 5. If trade is good for a country, it must be good for everyone in the country.

1. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. TRUE.

A country can have absolute advantage in the production of a good but that does not mean that they have comparative advantage. If they do not then they can still gain from trade by trading the good they have a comparative advantage in for the good they do not have a comparative advantage in.

2. Certain very talented people have a comparative advantage in everything they do. FALSE.

It is simply impossible to assume that someone can have a comparative advantage in everything because we are built differently.

3. If a certain trade is good for one person, it can't be good for the other one. FALSE.

The main purpose of trade is for it to be mutually beneficial to both parties so it is not true that a trade that is good for one person is not good for another.

4. If a certain trade is good for one person, it is always good for the other one.  FALSE.

Sometimes however, it is quite possible that trade is not always good for both party as one party could benefit from trade while the other does not.

5. If trade is good for a country, it must be good for everyone in the country. FALSE.

A trade being good for a country does not mean that it is good for all its citizens. For instance, if a country buys cars for a cheaper price from abroad, the car makers in the country will not benefit because they will see reduced sales for their domestically made cars.