Countries May Import and Export the "Same" Goods

In the numerical example, each country may import or export one of the two goods, but it doesn't make sense to both import and export the same good. In the real world, though, we do see the same country both importing and exporting the same good. For example, Britain both imports and exports automobiles. This is called "countertrade."

It generally turns out that they are "the same good" only in a rough way. Britain imports Toyotas and exports Jaguars -- and Toyotas and Jaguars are different goods in many ways. A British consumer might prefer a Toyota to a Jaguar, and a Japanese consumer might prefer the Jaguar, and these preferences for goods of the foreign variety could lead to countertrade.

Nevertheless, countertrade seems to go beyond the comparative advantage theory, and economists are doing extensive research on countertrade in the 1990's -- so we don't have all of the answers to this one yet.

Monopoly