The use of indifference curves helps us determine the point
A) along the terms-of-trade line a country will choose.
B) where a country maximizes its resource productivity.
C) at which a country ceases to become competitive.
D) where the marginal rate of transformation approaches zero.

Question

Quizplus · Accepted Answer

Indifference curves are used in international trade theory to determine the combination of goods that a country will choose to consume at equilibrium, given its preferences and the terms of trade. This choice is made where an indifference curve is tangent to the country's trade opportunity (terms-of-trade) line, indicating the optimal trade-off between importing and exporting goods to maximize utility or satisfaction.

The Use of Indifference Curves Helps Us Determine the Point