World trade has both benefits and costs. Which statement best attests to this fact?

• A. World trade eliminates all economic inequalities between nations.
• B. World trade can increase overall economic welfare but may also lead to job losses in certain industries.
• C. World trade only benefits countries with large populations.
• D. World trade always results in higher prices for consumers.

Answer: (B)

Verified step by step guidance

1. Understand the concept of world trade: it involves the exchange of goods and services across international borders, which can lead to gains from specialization and comparative advantage.
2. Recognize that world trade can increase overall economic welfare by allowing countries to specialize in producing goods where they have a comparative advantage, leading to more efficient resource allocation and higher total output.
3. Acknowledge that while trade benefits the economy as a whole, it can also cause adjustment costs, such as job losses in industries that are less competitive internationally.
4. Evaluate the given statements by comparing them to the economic theory of trade benefits and costs, focusing on whether they reflect both positive and negative effects.
5. Conclude that the statement 'World trade can increase overall economic welfare but may also lead to job losses in certain industries' best captures the dual nature of trade's impact, highlighting both benefits and costs.