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The two countries have production possibility curves. The points on the curve correspond to the com binations of numbers in the table.

You will have more food and oil. It's an offer you can't refuse.

You will get more food and oil. It's an offer you can't refuse.

Both countries would be foolish to not accept it.

I.T. arranged the trade.

This hypothetical example exaggerates the gains a trader makes. The person arranging the trade has to compete with other traders and offer a better deal than the one presented here. The person who first sees a trading opportunity makes a lot of money. Smaller fortunes are made by the second and third persons who recognize the opportunity. The chance of making a fortune is gone once the insight is generally recognized. The instantaneous fortunes are not made without new insights, but traders still make their normal returns.

The benefits of trade go to the producers and consumers, not to the traders, but the long run can be years and even decades.

There are high gains of trade to be made when countries avail themselves of comparative advantage. It is not clear who gets these gains. The principle of comparative advantage does not determine how the gains of trade will be divided among the countries involved.

There are no laws regarding how real-world gains from trade will be apportioned, but economists have developed some insights into how those gains will be divided. The trader gets how much.

The trader gets less competition.

Entry into trade is unimpaired most of the time. The trader will pass the larger gains of trade to the smaller countries. If the product is unique and cannot countries, the trader's big gains proportion of the gain is in markets that are newly opened.

This insight is important to trading companies. The economies of scale get a bigger gain from trade.

People from trading companies go around selling goods to countries. As the United States lifted sanctions on Iran, many of the same people were waiting to set up deals with Cuba.

The reason is that there are more opportunities for smaller countries when it comes to trade.

The United States begins trade with a small country in Africa. Prices of all types of goods will fall, because of Enormous new consumption possibilities. Before international trade began, cars were more expensive in Malian than fish were. With international trade, the price of cars in the country falls. The U.S. price of fish doesn't change much because the economy is so large. The fish are a drop in the bucket.

The United States doesn't get much of the gains of trade because the price ratio of cars to fish doesn't change much. Most of the gains come from trade.

The gains-from-trade argument has an important catch. Competition among traders is what holds the argument together. That means that U.S. residents pay the same price for a car as Malians. International traders in small countries keep large shares of the gains from trade for themselves. The United States and Saudi Arabia did not get a large share of the benefits. It was I.T. The larger country's international traders get more of the gains from trade than the smaller country's traders.

Goods that exhibit economies of scale are the ones that gain the most from trade.

Trade can increase production. The average cost of production of a good can be lowered if there are economies of scale. The price of good in the producing country can be lowered by an increase in production. What circumstances would a small country not get more from trade than it gets from its trading partner?