19.2 What Happens When a Country Has an Absolute Advantage in All Goods

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Show the relationship between production costs and comparative advantage

•

•

Identify situations of mutually beneficial trade

Identify trade benefits by considering opportunity costs

What happens to the possibilities for trade if one country has an absolute advantage in everything? This is

typical for high-income countries that often have well-educated workers, technologically advanced equipment,

and the most up-to-date production processes. These high-income countries can produce all products with

fewer resources than a low-income country. If the high-income country is more productive across the board,

will there still be gains from trade? Good students of Ricardo understand that trade is about mutually

beneficial exchange. Even when one country has an absolute advantage in all products, trade can still benefit
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