If two nations specialize in their respective comparative advantage and then trade with each other, both nations can consume output-combinations that are beyond their production possibilities curves.

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This statement is a basic concept of international trade theory known as the principle of comparative advantage. When nations specialize in producing the goods and services that they can produce most efficiently, and then trade with other nations that have different comparative advantages, both nations can benefit from consuming a combination of goods that are beyond their individual production possibilities curves.

If Two Nations Specialize in Their Respective Comparative Advantage and Then