Specialisation and trade make a country better off because, with trade, the country can consume at a point
A) outside its production possibilities frontier.
B) inside its trading partner's production possibilities frontier.
C) inside its production possibilities frontier.
D) on its trading partner's production possibilities frontier.
E) on its production possibilities frontier.

Question

Quizplus · Accepted Answer

Specialisation and trade allow a country to focus on producing the goods and services where it has a comparative advantage and then trade with other countries for goods and services that it has a comparative disadvantage in producing. This allows the country to consume at a point outside its production possibilities frontier, which means it can consume a combination of goods and services that it cannot produce on its own. This leads to increased economic welfare and a higher standard of living for the country's citizens.

Specialisation and Trade Make a Country Better Off Because, with Trade