Final answer:
International trade allows each country to specialize in producing goods and services in which it has a comparative advantage, leading to increased overall productivity and living standards.
Step-by-step explanation:
International trade can raise living standards in all countries by allowing each country to specialize in producing goods and services in which it has a comparative advantage. Comparative advantage refers to the ability of a country to produce a good or service at a lower opportunity cost than another country. By specializing in the production of goods and services they are efficient at producing, countries can increase their overall productivity and output.
For example, let's consider two countries: Country A and Country B. Country A has a skilled workforce and advanced technology which makes it efficient in producing electronics. On the other hand, Country B has a large amount of fertile land and a favorable climate for agriculture, making it efficient in producing agricultural products. If these two countries engage in international trade, Country A can focus on producing electronics while Country B can focus on producing agricultural products. Both countries will benefit from trade as they can each consume more goods and services than if they were producing everything on their own.
In conclusion, international trade allows countries to specialize in what they do best and produce goods and services more efficiently, leading to increased productivity and living standards for all countries involved.