If a country is currently producing at a production point such that the trade line has a slope that is flatter than the slope of the PPC at the same point,then
A)the country can get greater gains from trade if it moves production away from the good on the vertical axis.
B)the country can get greater gains from trade if it moves production toward the good on the vertical axis.
C)the country cannot improve on its gains from trade.
D)There are no gains from trade in this example.

Question

Quizplus · Accepted Answer

If the trade line has a slope that is flatter than the slope of the PPC, the country is not maximizing its production efficiency. This means that by specializing in the production of the good on the vertical axis, it can produce more of that good for the same opportunity cost of the other. By moving production toward the vertical axis, the trade line becomes steeper, indicating that the country can get greater gains from trade. Therefore, choice B is correct.

If a Country Is Currently Producing at a Production Point