Economics Production Possibility Frontier Questions
International trade can affect the production possibility frontier by expanding it. When a country engages in international trade, it can specialize in producing goods or services in which it has a comparative advantage. This allows the country to allocate its resources more efficiently and increase its overall production. As a result, the production possibility frontier shifts outward, indicating that the country can now produce more of both goods or services. Additionally, international trade can also lead to the transfer of technology, knowledge, and capital, which can further enhance a country's production capabilities and shift the production possibility frontier outward.