Final answer:
Specialization and trade increase production through comparative advantage, allowing each country to focus on producing goods for which they are relatively more efficient, thus supporting economies of scale and lowering average costs.
Step-by-step explanation:
Specialization and trade lead to greater production due to comparative advantage. When individuals and firms specialize, they focus on the production of goods and services for which they have the lowest opportunity cost, meaning they give up less in other areas to produce these goods. As a result, they can produce more efficiently and at a higher quality, leading to increased production and greater output.
David Ricardo's principle of comparative advantage explains that even when a country has an absolute advantage in all goods, it can benefit from trade by specializing in goods for which it has a comparative advantage. This means that a country should produce goods that it can produce relatively more efficiently compared to other goods, even if it can produce everything at a lower cost. Specialization allows economies to focus on their strengths, leading to economies of scale and a decrease in average costs, which in turn boosts productivity and overall production.