If there is no comparative advantage between two countries S

If there is no comparative advantage between two countries: Select one: a. one country must be more productive in producing all goods than the other. b. the benefits resulting from trade are increased. c. there are no gains from specialization and trade. d. each country should specialize in the production of a particular commodity.

Solution

Well,this is a rare case.

But if there is no comparative advantage between two countries,it is still beneficial to specialise in particular good.Many reasons can explain this point.First, demand could be different in both countries.If one country has more demand for a product than other product , it can produce product with higher demand and import good with lower demand.Also trade can result into greater efficiency due to increased competition among producers.Also country\'s specialisation in particular product lead to increase in its export and hence it can import more goods.

Trade also builds social and political relations between the countries.

After trade, countries can gain economies of scale, which will then bring comparative advantage between the two countries.