(A) Suppose That Two Countries Have Identical Increasing-Opportunity-Costs Production-Possibilities Frontiers

question 10

Essay

(a) Suppose that two countries have identical increasing-opportunity-costs production-possibilities frontiers (PPFs). Illustrate and carefully explain why, under certain conditions, the two countries can have an incentive to trade with each other. In addition, illustrate and explain how they can therefore both gain from trade.
(b) Suppose that two countries, in a situation where they each have an increasing-opportunity-costs production-possibilities frontier (PPF), have identical tastes and preferences (demands). Illustrate and carefully explain why, under certain conditions, the two countries can have an incentive to trade with each other. Why can they gain from trade?

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