zxdfmlp asked in Social ScienceEconomics · 6 months ago

Do you sign this trade agreement?

Imagine that you a king of the country Abra. Abra is a prosperous country with 100 units of wealth.

You are presented with the opportunity to enter into a trade agreement with another country, Cadabra. Cadabra is also prosperous, with 95 units of wealth.

You calculate that if you sign the trade agreement, Abra s wealth will grow from 100 units to 105 units. Your people will become wealthier.

You also figure that Cadabra s wealth will increase from 95 units to 110 units.

Do you sign this trade agreement?

1 Answer

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  • Oiy
    Lv 5
    6 months ago

    Yes, it's obviously a win-win situation called a trade creation of the trade agreement. Imagine that there were 5 countries, including Germany, France, Italy etc which have signed such an agreement.

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