Question

If producers have different opportunity costs of production, what will trade allow them to do in terms of their production possibilities frontiers?

Answer 1

Trade enables producers to specialize in goods for which they have a lower opportunity cost, improving their PPF and increasing total production.

Step-by-step explanation:

When producers have different opportunity costs of production, trade allows them to focus on producing the goods for which they have a lower opportunity cost, or a comparative advantage. As a result, they can trade for goods that have a higher opportunity cost for them to produce, thus effectively expanding their production possibilities frontiers (PPF). The slope of the PPF indicates the opportunity cost of producing one more unit of a good, and through trade, each producer can specialize in goods where the slope of their PPF (opportunity cost) is lower, leading to increased overall productivity and gains from trade.