Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates
A) a rightward (outward) shift of the production possibilities curve.
B) increasing opportunity costs.
C) achieving points beyond the production possibilities curve through international specialization and trade.
D) productive efficiency.

Question

Quizplus · Accepted Answer

This reality illustrates that Scoobania can achieve points beyond the production possibilities curve through international specialization and trade. By trading 1 unit of consumer goods for 1 unit of capital goods from another country, Scoobania can produce more capital goods than it would be able to produce domestically while also consuming the same amount of consumer goods. This allows for a more efficient allocation of resources and an increase in overall production possibilities.

Suppose That Scoobania, Which Has Full Employment, Can Obtain 1