In a two by two model of international trade it... - JAMB Economics 2023 Question
In a two by two model of international trade, it is assumed that
both countries could gain from trade at the same time, but the volume of the gains depends on terms of trade
both countries could gain from trade at the same time, but term of trade is inconsequential for the distribution of the gains
neither country could ever gain from trade since term of trade is depends on the distribution of the gains from trade
both countries could gain from trade at the same time, and the volume of the gains does not depend on terms of trade
In a two by two model of international trade, it is assumed that both countries could gain from trade at the same time, but the volume of the gains depends on terms of trade. This means that trade can be beneficial for both countries, but the distribution of those gains is influenced by the terms of trade, which refers to the relative prices of the goods traded between the two countries. Option B correctly captures this assumption.
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