Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 3 - Part I - Interdependence and the Gains from Trade - Questions for Review - Page 59: 3

Answer

a) both obtain consumption outside their PPFs

Work Step by Step

Individuals should specialize in the production of goods in which they have a comparative advantage and then trade with one another. This enables them to obtain a level of consumption outside their own production possibilities frontier, since individually manufacturing each good would lead to a higher opportunity cost.
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