Question

55.  Chapter ma2pe08r, Section .32, Problem 049 (ID: 049.03.2 - MC - MANK08)

The gains from trade are

a. evident in economic models, but seldom observed in the real world.

b. evident in the real world, but impossible to capture in economic models.

c. a result of more efficient resource allocation than would be observed in the absence of trade.

d. based on the principle of absolute advantage.

Answer 1

Autarky equilibrium occurs in an economic model, at a point where demand and supply is equal and that determines the prices and quantity of products and services in an economy. The Autarky condition is visible in a closed economy that has no trade relations with other countries of the world. But in reality, Autarky condition does not exists as all countries are engaged in international trade with one another.   The correct answer is

a. Evident in economic models, but seldom observed in the real world.