Question

Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9,000 pizzas. Now consider the following statement: "Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus ‘move outside its production possibilities curve.’"

Answer 1

Answer: It concerns international trade.

Explanation:

A nation's production possibilities curve shows the set of goods produced in a given economy and the trade off in production in an environment of resource scarcity. Thus, to produce a particular good, the curve shows that countries must stop producing one good to produce another good. In this case, it would take 10,000 pizzas to produce 1 robot. However, through specialization, countries can specialize in producing goods in which they are most productive and, with international trade, exchange them. This theory is called the theory of absolute advantages, where each country specializes in what is most productive and, through international trade, exchanges, decreasing the opportunity cost of obtaining goods and increasing the possible combinations in the production possibilities curve. . In the example described, if the robot were produced in another country, it would only have to exchange 9,000 pizzas for 1 robot.