Suppose two countries have similar resources, capital, and skilled labor. If they produce more, the cost per unit of production for both goods declines as more goods are produced. The most efficient method to produce the products is for each country to

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Quizplus · Accepted Answer

This scenario describes the principle of comparative advantage, where each country specializes in the production of goods for which it has a lower opportunity cost, and then trades with others to obtain goods it does not produce. This leads to more efficient global production and increased overall welfare.

Suppose Two Countries Have Similar Resources, Capital, and Skilled Labor