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Question 15 1 pts If trade between nations is prohibited, nations will more easily achieve specialization in production and end up consuming more nations can refine their ability to allocate resources and therefore raise consumption. nations will be unable to specialize in what they are good at and therefore end up consuming less

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Answer #1

Answer is option c).

Explanation: Suppose there are two goods X and Y. Nation 1 has a competitive advantage in producing good X and Nation 2 has competitive advantage in producing good Y. This implies that Nation 1 uses more labour and capital to produce good Y and Nation 2 uses more labour and capital to produce X. Nation 1 can export X in return for Y.

If trade in nation is prohibited then Nation 1 will have to sacrifice more units of X to produce less number of units of Y, which the nation could have easily exchanged from nation 2 and also in higher quantities. In this way production of both the goods reduces so as the consumption. Hence the consumers end up consuming less.

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