Consider two countries that trade with each other.The degree of specialization according to their respective comparative advantages will be greater if the countries face:

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Constant costs refer to a situation where the cost of producing a good does not change as the quantity produced increases. When countries face constant costs, they can specialize in producing the goods in which they have a comparative advantage and trade with each other. This will lead to a greater degree of specialization and efficiency in production, which will benefit both countries. On the other hand, if a country faces increasing costs, it will be less likely to specialize in the production of a particular good, as the cost of producing additional units will increase. High tariffs will discourage trade, which will also reduce the degree of specialization. Low unemployment rates are not directly related to the degree of specialization or trade.

Consider Two Countries That Trade with Each Other