If two countries agree to specialize and trade based on comparative advantage,which of the following is most likely to be true?
A)Both of the countries will consume outside their respective production possibilities curves.
B)One of the countries will end up receiving all of the gains from trade.
C)One of the countries will both consume and produce on its production possibilities curve.
D)Only one of the countries will produce on and consume outside its production possibilities curve.

Question

Quizplus · Accepted Answer

When two countries specialize and trade based on comparative advantage, they can both consume more than they would in isolation, effectively allowing them to consume outside their respective production possibilities curves. This is because specialization and trade enable each country to operate more efficiently, producing more of what they are relatively better at and trading for what they are relatively less efficient at producing.

If Two Countries Agree to Specialize and Trade Based on Comparative