Final answer:
The theory reflected in countries specializing in manufacturing particular products for a limited global market is the theory of Dynamic Comparative Advantage in international trade, which is tied to economies of scale and market competition, resulting in efficiency and innovation.
Step-by-step explanation:
The situation described where some countries specialize in manufacturing products like cars, catered to by a limited number of firms due to global market constraints, reflects the theory of Dynamic Comparative Advantage in international trade. This theory examines how countries gain efficiency through specialization and trade, taking advantage of economies of scale for the production of particular goods. For example, if the automotive industry in the United States were limited to General Motors, Ford, and Chrysler without international trade, there would be little competition and consumer choice would be restricted.
However, when U.S. carmakers face competition from global firms like Toyota, Honda, and BMW, it increases competition, fosters innovation, and results in higher-quality products. This global trade strategy allows countries to enhance their productive efficiency and offer greater variety to consumers. Additionally, concerns about environmental regulations and national security often influence trade policies and restrictions, further shaping the dynamics of international trade.