2. China has a comparative advantage in producing shoes.

China exports shoes, Chinese shoe producers gain, and Chinese consumers of shoes lose. The gains exceed the losses: China gains from international trade in shoes.

Figure 2 shows the shoe market in China. The price before trade is P . With trade, the price rises to the world price, P . Producers gain the area B, consumers lose the area B, and the net gain from trade in shoes is area D.

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