Question

Two countries that specialize their production along the lines of comparative advantage and then trade with each other will be able to:

a) Increase production costs
b) Achieve self-sufficiency
c) Experience mutual benefit from trade
d) Encounter economic stagnation

Answer 1

Two countries that specialize based on comparative advantage and then trade will experience mutual benefit from trade, as they can both produce more effectively and have access to a variety of goods.

Step-by-step explanation:

When two countries specialize their production along the lines of comparative advantage and engage in trade, they can both experience mutual benefit from trade. This happens because each country focuses on producing goods where they have a lower opportunity cost, which enables each of them to produce more efficiently and have access to a more significant array of goods than they would in the absence of trade. Even if one country has an absolute advantage in producing all goods, they still gain from trade by specializing in the goods that they are relatively more efficient at producing, as articulated by David Ricardo's theory of comparative advantage, leading to mutually beneficial trade relationships.