Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A produces only x, it can make 20x per day. If nation A produces only y, it can make 15y per day. If nation B produces only x, it can make 15x per day. If nation B produces only y, it can make 15y per day. After trade begins nation _______ will specialize in the production of x and nation _______ will specialize in the production of y.

Question

Quizplus · Accepted Answer

In order to maximize production and benefit from trade, each nation should specialize in producing the good that it has a comparative advantage in, meaning the good that it can produce at a lower opportunity cost than its trading partner. 
Nation A has a comparative advantage in producing x because it can produce 20 units of x per day compared to nation B's production of 15 units of x per day. 
Nation B has a comparative advantage in producing y because it can produce 15 units of y per day compared to nation A's production of 15 units of y per day (meaning they have equal production capabilities). 
Therefore, nation A will specialize in producing x and nation B will specialize in producing y.

Suppose There Are Only 2 Nations a and B, and Only