Question

Refer to the graphs and information above. Assume that prior to specialization and trade, Italy and Greece preferred points I and G on their respective production possibilities curves. As a result of complete specialization according to comparative advantage, the resulting gains in total output will be:

a) Equal for both Italy and Greece
b) Higher for Italy
c) Higher for Greece

Answer 1

The gains in total output resulting from complete specialization according to comparative advantage will be higher for both Italy and Greece.

Step-by-step explanation:

The gains in total output resulting from complete specialization according to comparative advantage will be higher for both Italy and Greece. When each country specializes in producing the goods they have a comparative advantage in, they can increase their efficiency and productivity. This leads to a larger total output for both countries, resulting in gains from trade.