How does the comparative advantage concept relate to a nation\'s production possibilities schedule? Illustrate how differently shaped production possibilities schedules give rise to different opportunity costs and a different MRT.
Solution
The production possibilities curve gives us a model of an economy. The model provides powerful insights about the real world, insights that help us to answer some important questions: How does trade between two countries affect the quantities of goods available to people? What determines the rate at which production will increase over time? What is the role of economic freedom in the economy? In this section we explore applications of the model to questions of international trade, economic growth, and the choice of an economic system.
Comparative Advantage and International Trade
One of the most important implications of the concepts of comparative advantage and the production possibilities curve relates to international trade. We can think of different nations as being equivalent to Christie Ryder
.
How does the comparative advantage concept relate to a nation-'s produ.docx
1. How does the comparative advantage concept relate to a nation's production possibilities
schedule? Illustrate how differently shaped production possibilities schedules give rise to
different opportunity costs and a different MRT.
Solution
The production possibilities curve gives us a model of an economy. The model provides
powerful insights about the real world, insights that help us to answer some important questions:
How does trade between two countries affect the quantities of goods available to people? What
determines the rate at which production will increase over time? What is the role of economic
freedom in the economy? In this section we explore applications of the model to questions of
international trade, economic growth, and the choice of an economic system.
Comparative Advantage and International Trade
One of the most important implications of the concepts of comparative advantage and the
production possibilities curve relates to international trade. We can think of different nations as
being equivalent to Christie Ryder
