ABSTRACT
In our exposition of the theory of international trade, we started with countries that were initially operating as closed economies. We allowed these isolated economies to trade freely with each other, and then we analyzed the economic effects of trade. An important conclusion we drew was that economies, if not all individuals in the economy, generally gain from trade. When each country specializes in products in which it has a comparative advantage, exporting them in exchange for imports of other products in which it has a comparative disadvantage, the result is a gain in economic welfare. Even when comparative advantage and autarky differences in costs of production do not provide a basis for trade, gains are possible as economies of scale are attained and competition results in greater production, lower prices, and additional variety.
