Consider two countries which trade with each other.The degree of specialization according to their respective comparative advantages will be greater if the countries face:

Question

Quizplus · Accepted Answer

If the countries face constant costs, they will have a greater incentive to specialize in the goods and services that they have a comparative advantage in. This means that each country will produce the goods and services that they can produce most efficiently and trade them for goods and services that the other country produces most efficiently, resulting in a higher degree of specialization and efficiency in their respective industries. This will lead to increased trade and economic growth between the two countries. If the countries face increasing costs or high tariffs, it may hinder trade and decrease the degree of specialization. Low unemployment rates do not necessarily have a direct impact on trade or specialization.

Consider Two Countries Which Trade with Each Other