The primary benefit of trade between nations is to do what?

• A. Share goods
• B. Increase tariffs
• C. Limit competition
• D. Create monopolies

Answer: (A)

When nations trade, the biggest benefit comes from accessing a wider variety of goods and doing so more efficiently through specialization. Countries tend to be relatively good at producing certain goods and less efficient at others. By focusing on what they can produce most efficiently and trading for the rest, each country can get more overall output and a greater assortment of products than if it tried to produce everything domestically. This idea—specializing and trading to obtain goods at lower cost—drives the gains from trade and explains why sharing goods between nations is so valuable.

Tariffs raise costs and limit exchange, reducing the gains from trade. Policies that crush competition or foster monopolies also hinder trade and lessen the benefit by making goods more expensive and less diverse.