What is likely to happen if two nations utilize the theory of comparative advantage in their trade?

When two nations utilize the theory of comparative advantage in their trade, it is likely that each nation will specialize in producing different specific goods. Comparative advantage refers to a situation where a country can produce a good or service at a lower opportunity cost than another country. By focusing on what they can produce most efficiently, each nation can maximize its output and benefits from trade.

When each nation specializes in the production of goods where they have the greatest comparative advantage, they can trade with each other. This specialization enables them to produce a surplus of those goods, which they can then exchange for other goods that they do not produce as efficiently. Consequently, both nations benefit from increased total production and consumption possibilities, fostering economic efficiency and enhancing overall welfare.

This collaborative approach leads to a more effective allocation of resources, as each nation works to bolster its comparative advantages, ultimately resulting in a greater variety of goods and services available to both countries through trade.