If countries 1 and 2 produce only two goods,A and B,and they have the same opportunity cost for the production of good A (and thus good B),then
A) each country will specialize in the production of one good and engage in trade.
B) neither country will specialize in the production of a good,but both will engage in trade.
C) one country will specialize in the production of a good,and both will engage in trade.
D) neither country will specialize in the production of a good,and there will be no incentive for trade.

Question

Quizplus · Accepted Answer

When two countries have the same opportunity cost for producing two goods, it means they have identical comparative advantages, or rather, no comparative advantage in either good. Without a comparative advantage, there is no incentive for specialization or trade, as neither country can benefit from the trade based on the principle of comparative advantage.

If Countries 1 and 2 Produce Only Two Goods,A and B,and