# Suppose 1 country was more efficient at producing both products. Discuss whether it is the case that specialisation and trade will always benefit both countries.

by donemilkingcowsgmailcom (student)

Suppose 1 country was more efficient at producing both products. Discuss whether it is the case that specialisation and trade will always benefit both countries.

When 1 country is more efficient at producing both products, specialisation and trade will still benefit both countries to a large extent if there are differing opportunity costs between the 2 countries. When 1 country has lower opportunity costs in producing the good than the other, it means that it has a comparative advantage. This is explained in the table below.

Assume 2 countries have the same amount of labour: 100 workers. The table below represents the output of 2 different goods they produce.

From the table, it can be seen, with the same number of labourers (50 of them), country A is more efficient in producing both guns and roses now. However the opportunity cost of producing a gun in country A is 2 roses whereas the opportunity cost of producing a gun in country B is 3 roses. This means that A has a comparative advantage in producing guns. Thus A should specialise in producing guns and B in roses and trade can still be beneficial. This can be elaborated with an example. Imagine after specialisation, A will produce 200 guns and ...