Exhibit 21-1 Production possibilities curves

In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If both countries specialize in one good and trade for the other, :

Question

Exhibit 21-1 Production possibilities curves

In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If both countries specialize in one good and trade for the other, :

Quizplus · Accepted Answer

When both countries specialize in one good and trade for the other, they will be able to consume at a point to the right of their respective production possibilities curves. This is because specialization leads to increased productivity and efficiency, allowing each country to produce more of their specialized good than they would have been able to under autarky. Trading with each other allows them to access the other good at lower prices than they would have been able to produce it for themselves, enabling them to consume beyond their own production possibilities curves.

Exhibit 21-1 Production Possibilities Curves