In a two-country two-commodity model, if a country has higher labor productivity in producing both the goods, it must produce and export both the goods to the other country.

Question

Quizplus · Accepted Answer

According to the theory of comparative advantage, a country will specialize in producing and exporting the good for which it has a comparative advantage (i.e., the good it can produce at a lower opportunity cost), not necessarily every good for which it has an absolute productivity advantage.

In a Two-Country Two-Commodity Model, If a Country Has Higher