When Two Countries Decide to Follow Their Comparative Advantage and Engage

question 81

Essay

When two countries decide to follow their comparative advantage and engage in specialization and exchange,both countries experience gains from trade because they are able to consume at a point beyond their production possibilities frontier.Illustrate and explain how this is possible.

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Definitions:

Discharged From Liability

A condition where an individual or entity is legally released from an obligation or debt.

Paying The Holder

The act of disbursing funds or settling a financial obligation to the lawful possessor of a negotiable instrument.

Indorses

To sign one's name on a document, especially on the back of a check or negotiable instrument, to make it payable to someone other than the stated payee or to accept responsibility.

Discharged From Liability

The release of a debtor from the obligation to repay a debt, usually following a legal process such as bankruptcy proceedings.