If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world) output?
A)It will increase.
B)It will decrease.
C)It will be unchanged in both countries.
D)It will rise in one country and fall in the other, but the total is unchanged.
E)Uncertain; economic theory has no answer to this question.

Question

Quizplus · Accepted Answer

If each country specializes in the good in which it has a comparative advantage, they will produce more efficiently, which will lead to an increase in total (world) output. By focusing on their strengths, they can produce more of that good at a lower cost than the other country, which creates gains from trade and increases economic welfare overall.

If Two Countries Each Are Currently Producing Two Goods, and Each