Macroeconomics: Principles, Problems, & Policies 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0-07766-077-3
ISBN 13: 978-0-07766-077-2

Chapter 1 - Limits, Alternatives and Choices - Discussion Questions: 10

Answer

Specialization and trade enables a country to obtain goods at a lower opportunity cost, and as a result, can produce more, which causes a shift of the production possibility curve.

Work Step by Step

The opportunity cost for Country A (forgoing 10,000 pizzas for 1 robot) is less than the opportunity cost for Country B (forgoing 9,000 pizzas for 1 robot). As a result, Country B is better off exchanging pizzas for industrial robots, as it means they can give up less pizzas and can still increase the supply of robots. Graphically, this causes the PPF to shift outwards, as more robots can be obtained.
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