-In Table 1.2, assume that before specialization and trade, both countries were producing at production possibility C. If each country specializes according to comparative advantage, what will be the gains from trade?

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Quizplus · Accepted Answer

By specializing according to comparative advantage, both countries together can produce more of both goods than they could individually without trade. The specific gains depend on the comparative advantage of each country in producing sugar and coffee, leading to an overall increase in production for both commodities when each country focuses on the product it can produce more efficiently.