In the neoclassical (or modern) theory, two countries with identical production-possibilities frontiers (PPFs)
A) can gain from trade with each other if demand conditions (tastes) differ in the two Countries and the identical PPFs demonstrate increasing opportunity costs.
B) can gain from trade with each other if demand conditions (tastes) differ in the two Countries and the identical PPFs demonstrate constant opportunity costs.
C) can gain from trade with each other even if demand conditions (tastes) are identical in The two countries as long as the identical PPFs demonstrate constant opportunity Costs.
D) cannot gain from trade with each other under any circumstances.

Question

Quizplus · Accepted Answer

If two countries have identical PPFs with increasing opportunity costs, they can still gain from trade if their demand conditions differ, as this can lead to different relative prices and comparative advantages.

In the Neoclassical (Or Modern) Theory, Two Countries with Identical