Final answer:
Specialization and trade allow producers to focus on goods for which they have a comparative advantage, thereby increasing total output and allowing mutual gains, despite absolute advantages in production. This leads to expanded production boundaries and the enhancement of overall economic efficiency.
Step-by-step explanation:
The concept at hand is how specialization and trade can benefit two producers, Hosne and Merve, who are assumed to have comparative advantages in different products, specifically purses and wallets. When each producer focuses on the good for which they have a comparative advantage—Hosne may produce purses more efficiently, while Merve produces wallets—their production boundaries can expand, enabling them to trade and benefit mutually. By specializing, they can produce a greater total output, and through trade, each can have more of both goods than if they had remained self-sufficient.
Through the lens of David Ricardo's comparative advantage theory, even if one producer has an absolute advantage in producing both goods, it is still beneficial to specialize and trade. This outcome occurs because gains from trade are not about producing a good with the least amount of resources (absolute advantage), but rather about where the opportunity costs are lower (comparative advantage). This trade can lead to an increase in total world production, demonstrating the power of specialization.