The expansion of world output as a result of trade is mainly due to the effects of

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Quizplus · Accepted Answer

Specialization according to comparative advantage allows countries to focus on producing goods and services in which they have a lower opportunity cost, leading to more efficient production and a larger output. This increased output also leads to greater trade, as countries can export their specialized goods and import those they are less efficient at producing, resulting in an expansion of world output. Higher trade barriers would have the opposite effect, limiting trade and reducing overall output. Improved terms of trade can benefit individual countries, but alone would not necessarily lead to an expansion of world output.

The Expansion of World Output as a Result of Trade