Final answer:
Comparative advantage allows trade between countries of different sizes and economic prosperity by enabling specialization, competition, and variety. Smaller economies benefit from economies of scale, while larger economies gain access to goods and services at a lower opportunity cost.
Step-by-step explanation:
The theory of comparative advantage suggests that trade should happen between economies with large differences in opportunity costs of production. When countries with different sizes and economic prosperity engage in trade, comparative advantage allows them to specialize in the goods and services they can produce most efficiently and at the lowest opportunity cost. This enables smaller economies to benefit from economies of scale, competition, and variety offered by several producers.
For example, even if a smaller country like the United Kingdom or Belgium has only one or two large factories producing cars, international trade allows consumers in that country to have a wider variety of car choices by importing cars from other countries. This brings competition, innovation, and responsiveness to consumer demands. Similarly, larger economies like the United States benefit from trade by accessing goods and services produced in other countries at a lower opportunity cost, further enhancing their economic prosperity.