Question: 3]. When international trade is based only on the differences featured in the factor endowments theory, the shift from no trade to free trade does

3]. "When international trade is based only on the differences featured in the factor endowments theory, the shift from no trade to free

trade does not create any gains from trade for the countries involved."

Do you agree or disagree with this statement, and why? Support your

3]. "When international trade is based only on the differences featured in the factor endowments theory, the shift from no trade to free trade does not create any gains from trade for the countries involved." Do you agree or disagree with this statement, and why? Support your answer with information provided in the Chart below. (a) Autarky Equilibrium (b) Post-trade Equilibrium Textiles (Labor Intensive) Textiles (Labor Intensive) China's Production China's Production 13 B Possibilities Frontier Possibilities Frontier Terms of Trade (1:1) China's MRT = 4.0 C A 6 U.S. Production U.S. MAT = 0.33 Possibilities Frontier U.S. Production Possibilities Frontier B' O- 0 7 3 7 9 15 Aircraft (Capital Intensive) Aircraft (Capital Intensive)

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