Question

Though the countries can benefit by completely specializing in the production of the good in which they have comparative advantage, in real world however, they do not completely specialize. true or false

Answer 1

True statement:

countries are benefitted by completely specialising in the production of goods. But in real world, countries do not specialise completely. Following factors are held responsible for such trends:

• It has been seen that countries do not trade all goods internationally. Hence, complete specialisation is not materialised.
• Further, opportunity cost also rises when a country goes for specialisation.
• Complete specialisation and dependency on other countries for essential item may make country vulnerable. hence all countries do not prefer to specialise in single good production.