When two countries specialize and trade with one another, total production:
A) remains unchanged, but consumption rises.
B) increases, but only if a comparative advantage exists.
C) may increase, depending on trade relations.
D) remains unchanged, as does consumption.

Question

Quizplus · Accepted Answer

When two countries specialize in producing goods they have a comparative advantage in, they can produce more efficiently and increase total production. This leads to increased trade and consumption, as the countries can produce more than they would have otherwise. However, this assumes that there is a comparative advantage and that trade is happening freely and fairly between the two countries. If either of these conditions are not met, total production may not increase.

When Two Countries Specialize and Trade with One Another, Total