Question

True or False: Without engaging in international trade, Freedonia and Lamponia would have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.)

Answer 1

"Without engaging in international trade, Freedonia and Lamponia would have been able to consume at the after-trade consumption bundles" is FALSE.

Option: B

Explanation:

Specialization refers to countries' propensity to focus in certain items they exchange for other commodities, rather than to manufacture all the consumer goods on their own. As the PPF production possibilities frontier displays that production is impractical, Freedonia and Lamponia had to engage in international trade.

Both countries are able to consume the goods they produce.When a country is skilled in manufacturing a good, it can manufacture this good at a lower cost of opportunity than its trading nation. For this comparative advantage, both countries benefit from competing and trading with one another.