WORLD HISTORY

Detailed explanation-1: -Countries trade with each other when, on their own, they do not have the resources, or capacity to satisfy their own needs and wants. By developing and exploiting their domestic scarce resources, countries can produce a surplus, and trade this for the resources they need.

Detailed explanation-2: -The five main reasons international trade takes place are differences in technology, differences in resource endowments, differences in demand, the presence of economies of scale, and the presence of government policies.

Detailed explanation-3: -Trade contributes to global efficiency. When a country opens up to trade, capital and labor shift toward industries in which they are used more efficiently. Societies derive a higher level of economic welfare.

Detailed explanation-4: -Increased Economic Resources Developing countries can benefit from free trade by increasing their amount of or access to economic resources. Nations usually have limited economic resources. Economic resources include land, labor and capital. Land represents the natural resources found within a nations’ borders.