Introduction to Economics 1 Deneme Sınavı Sorusu #1114379
According to economic theory trade in general and also international trade is what kind of game?
Is a win-loose game |
Is a zero-sum game |
Is a positive-sum game |
Is a loose-loose game |
Domestic trade is a positive-sum, but the international one is a zero-sum game. |
Trade as a Positive-sum Game
Just like other voluntary exchanges such as those between individuals, trade between two nations make (citizens in) each country better off. Trade between Spain and Turkey, for example, improves social welfare in both countries, not just in Spain, nor in Turkey alone. So, unlike a basketball match where one party wins and the other loses, both parties are winners in international trade. In other words, international trade is a positive-sum game, not a zero sum-game. Notice, however, that trade is actually carried out typically by the private firms of each country. In that sense, international trade is like a basketball match between Fenerbahçe and Real Madrid (the champion and finalist, respectively, of Euroleague 2017), rather than a match between national teams of Turkey and Spain.
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