Final answer:
Based on comparative advantage, countries should specialize in production of goods for which they can produce at a lower opportunity cost than others. This specialization and subsequent trade increase global production and consumption levels. An example provided was Country A specializing in wheat and Country B in corn, or Germany in video cameras and Poland in televisions.
Step-by-step explanation:
The concept of comparative advantage is fundamental in understanding international trade. If a country has a comparative advantage in the production of a good, it means that it can produce it at a lower opportunity cost than other countries. The principle suggests that countries will benefit from trade if they specialize in the production of goods for which they have a comparative advantage and then trade with others for goods where other countries hold a comparative advantage.
An example of this could be if Country A can produce wheat more efficiently than Country B, while Country B is more efficient at producing corn, even though one of the countries might produce both products with greater absolute efficiency. Here, Country A should specialize in wheat, and Country B should specialize in corn, because they have comparative advantages in those goods, respectively.
Specializing and trading based on comparative advantage can result in increased global production and higher levels of consumption for all countries involved. For instance, if Germany specializes in video cameras and Poland specializes in televisions, both countries can benefit from the trade, assuming these are the products they have a comparative advantage in.