Question

True or false: "unlike the mercantilists who argued that with free trade, international specialization of resources in production leads to an increase in world output that can be shared by trading partners, smith maintained that a nation could only gain at the expense of other nations because not all nations could simultaneously run trade surpluses."

Answer 1

The statement is false. International specialization of resources will do nothing but benefit world output. Different countries have access to different natural resources and different abilities of production. If each were to specialize in their resources and share them, and specialize in their productive abilities, the countries would all be able to benefit in trade.