International trade benefits both countries by allowing them to specialize based on their comparative advantages, leading to mutual gains and increased efficiency.
Both countries believe they will gain from the trade: When two countries willingly engage in international trade, it indicates that both countries expect to benefit economically from the exchange of goods and services. This mutual agreement signifies that each country sees the trade as advantageous and beneficial.
Comparative advantage: International trade allows countries to specialize in producing goods where they have a comparative advantage, leading to increased efficiency and overall welfare. This specialization enables each country to focus on what they produce most efficiently and trade for goods they cannot produce as effectively, resulting in mutual gains.
Win-win situation: The concept of international trade being a win-win situation is highlighted, where both trading nations experience improvements in production efficiency, consumption possibilities, and real wages, ultimately benefiting from the exchange of goods and services.
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