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What is meant by complete specialization? When is there complete specialization in the Ricardian model? Why?
What is meant by complete specialization? When is there complete specialization in the Ricardian model? Why?
Expert Solution
When a nation utilizes all its available resources in production of a commodity they are allocated in trade it is known as complete specialization.
In Ricardian Model complete specialization occurs when a country has a comparitive advantage in production of a commodity.
When an economy produces a commodity at a lower oppurtunity cost than its trading partners then the economy is said to have Comparitive advantage in the production of that particular commodity. By having comparitive advantage, what Ricardian meant is that the economy is not giving up much of production of other commodities to produce a particular commodity. With comparitive advantage, an industry can sell varieties of goods at a lower price, gaining stronger sales margin.
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