In a two-nation, two-good world, if one nation is more eﬃcient in producing both goods than the
other nation, then the more-eﬃcient nation cannot gain from trading with the other nation.

Question

Quizplus · Accepted Answer

The more-eﬃcient nation can still gain from trading with the less-efficient nation because they can specialize in producing the good that they are most efficient at producing and trade with the other nation for the good in which they are less efficient. This allows both nations to increase their overall output and welfare through trade.

In a Two-Nation, Two-Good World, If One Nation Is More