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Question & Answer
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Country A produces only wheat while Country B produces only cars, and they trade wheat for cars.
Country A produces wheat and cars, while Country B produces cars and computers, and they trade cars for wheat and computers.
Country A produces wheat and shares it equally with Country B, which produces nothing.
Country A produces wheat and imports everything else, while Country B produces a variety of goods without trading.
Understanding the Answer
Let's break down why this is correct
In this scenario, each country chooses to make the product they can produce most efficiently. Other options are incorrect because Both countries try to make many things, so they do not pick a single strong area; This choice has no trade, so there is no exchange of goods.
Key Concepts
Specialization and Trade
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Deep Dive: Specialization and Trade
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Definition
Specialization and trade refer to countries focusing on producing goods they have a comparative advantage in and trading with other countries. This concept allows nations to benefit from producing efficiently and trading for goods they cannot efficiently produce, leading to overall economic growth and welfare improvements.
Topic Definition
Specialization and trade refer to countries focusing on producing goods they have a comparative advantage in and trading with other countries. This concept allows nations to benefit from producing efficiently and trading for goods they cannot efficiently produce, leading to overall economic growth and welfare improvements.
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