Lowering trade barriers boosts gains from specialization

Steps:

• Identify factors that enhance comparative advantage and trade volumes.
• Evaluate how each option affects trade costs, efficiency, or barriers.
• Compare to economic theory on gains from trade.
• Select the option that reduces frictions in international exchange.

Why A is correct:

• Lower transportation costs reduce trade barriers, allowing greater specialization and exchange based on comparative advantage, per Ricardo's theory.

Why the others are wrong:

• B: Faster wage growth than productivity erodes competitiveness, raising export prices and reducing trade benefits.
• C: Occupational immobility slows labor reallocation to trade-advantaged sectors, limiting adjustment gains.
• D: Higher partner tariffs restrict market access, shrinking export opportunities and overall trade benefits.

Final answer: A