In the absence of trade, the consumption possibilities frontier _____ the production possibility frontier, and trading according to comparative advantage makes the consumption possibility frontier _____ the production possibility frontier.

Question

Quizplus · Accepted Answer

In the absence of trade, the consumption possibilities frontier is the same as the production possibility frontier because a country can only consume what it can produce. Trading according to comparative advantage allows countries to specialize in the production of goods for which they have a comparative advantage, thus enabling them to trade for other goods. This specialization and trade expand the consumption possibilities beyond the initial production possibilities frontier.

In the Absence of Trade, the Consumption Possibilities Frontier _____