Without international trade what is the relationship between

Without international trade, what is the relationship between a country\'s CPF and PPF? With international trade, what is the relationship between a country\'s CPF and PPF?

Solution

6.c. CPF is equal to (i.e., coincides with) the PPF.

7.a. CPF is greater than (i.e., lies to the northeast of) PPF.

Country M will specialize in the production of textiles and import cars from country N while country N will specialize in the production of cars and import textiles from country M.