A country with a comparative advantage in producing one good may lose this advantage if too many resources are shifted to producing this good as a result; the shifting of resources would thereby increase production costs because some ill-suited resources would thus be used to produce the good.

Question

Quizplus · Accepted Answer

This is the concept of diminishing returns to specialization. As more resources are shifted to producing one good, the marginal benefit of each additional unit of resources decreases and the marginal cost increases, ultimately leading to higher production costs.

A Country with a Comparative Advantage in Producing One Good