Multiple choice

The gains from two nations depend on:

  1. Domestic barter rates

  2. Difference in the domestic barter rates of the two countries

  3. Terms of trade

  4. Degree of absolute advantage
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C Correct answer
Explanation

Gains from international trade depend on the terms of trade - the ratio at which goods are exchanged between countries. Domestic barter rates and absolute advantage don't directly determine trade gains; it's the relative exchange terms.

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