Consider the figure to the right, in which two countries (country A and country B) that can produce a good are subject to forward-falling supply curves. In this case, the two countries have the same costs, so that their supply curves are identical. What would you expect to be the pattern of international specialization and trade? What would determine who produces the good? External Economics and Specialization Price cost O A. If one country starts out as a producer of a good, then all production will occur in that particular country and it will export to the rest of the world. Likely historical accident or chance would determine who produces the good B. Given that world demand can be satisfied by one country at a lower price than two or more countries, the World Trade Organization will intervene to determine which country is authorized to produce and export the good OC. One or both countries could end up producing and exporting the good The actual outcome would be determined by historical accident or chance OD. Both countries would produce and export the good. Whichover country started producing first, through historical accident or chance, would produce the larger share of world demand. Acer A AC Dworld Quantity produced and demanded