Final answer:
When specialization and trade occur based on lower production costs, productivity and competition both increase. This is due to the enhanced effectiveness and efficiency of focusing on specialized areas, leading to better outcomes in production and niche competition.
Step-by-step explanation:
When individuals, regions, and nations specialize in what they can produce at lower costs and then trade with others, both productivity and competition increase.
Specialization allows entities to focus on the production process where they have an advantage, which may be due to various factors such as skills, talents, educational choices, or geographical conditions. This specialization can lead to increased effectiveness and efficiency in production, boosting productivity.
Additionally, as different players concentrate on their strengths, they can compete more vigorously in their niche, leading to heightened competition. This concept can be scaled from individual levels to international trade, where the same principles apply, and trade can lead to economic gains through comparative advantage, learning and practice, and economies of scale.