Specialization can lead to an increase in the production of all goods only if
A)the two nations specialized in the production of goods.
B)each nation were to produce all goods.
C)the opportunity cost of producing goods differs between two nations.
D)neither country has a comparative advantage in the production of any good.

Question

Quizplus · Accepted Answer

Specialization leads to an increase in production only when there is a difference in the opportunity cost of production between two nations. If both the nations have the same opportunity cost for producing a good, there would be no gain from specialization. However, if one nation has a lower opportunity cost for producing a good than the other, they can specialize in producing the good they have a lower opportunity cost and trade with the other nation. This would lead to an increase in production of both goods.

Specialization Can Lead to an Increase in the Production of All