Are the following statements true or false? EXPLAIN in each case.

(***I will deduct points if you fail to explain***)

a) Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. True. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods as long as their comparative advantages are different. If the opportunity cost of producing a good in one country is smaller then opportunity cost of producing the same good in the other country, then both countries can still gain from trade because specialization can occur and the absolute advantage does not matter. b) Certain very talented people have a comparative advantage in everything they do. False. I don't think that certain very talented people have comparative advantage in everything they do; talented people would have a comparative advantage in the area than they are talented in, not in everything they do. For example a genius mathematician would be able to solve a integral in little time, but he would not be able to reproduce Mozart's Piano Concerto No. 5 as well as and as fast as a piano prodigy. This basically means the opportunity cost (in this case time) of the mathematician to play the piano would be higher than the opportunity cost of the piano prodigy would have playing the piano. So if you have a comparative advantage in one activity, then this means that you must have a comparative disadvantage in the other activity. c) If a certain trade is good for one person, it can't be good for the other one. False. If a certain trade is good for one person, it does not mean it can't be good for the other one. If one person has a comparative advantage in producing good A, and the other one has a comparative advantage in producing good B, then both of them benefit by trading. If trading would not benefit one of the people involved, then most probably the trade would not take place. d) If a certain trade is good for one person, it is always good for the other one. True.

If a certain trade is good for one person, it is always good for the other one otherwise the trade would not occur. If trading would not benefit one of the people involved, then the trade would not occur. e) If trade is good for a country, it must be good for everyone in the country. False. If trade is good for a country, does not mean it is good for everyone in the country. For example if a country has a comparative disadvantage in producing good A, and a comparative advantage in producing good B, then it would most probably decide to import that good A, and export good B. This will benefit the country as a whole (goverment income from tariffs, more options for their consumers, lower prices of good A) but it will have a negative effect for the domestic producers of good A.