Hi, I need some assistance with these questions. I am having difficulties formulating an answer.
1. Out of all of the possible production points along a production possibilities curve, which one of those points does a nation select and why?
2. International trade theory says that relative product prices would differ if there was no trade between the countries. What is the basis for this theory?
3. What does the Heckscher-Ohlin Theory say about what determines the trade patterns between countries?
The response addresses the queries posted with references.
1. Out of all the possible production points along with the production possibilities curve, this paper will include the points that a nation must select in response to an increase in its production. It will also explain the reason as to why these points are important.
The production possibility frontier represents the possible points, at which the economy can produce its most efficient goods and services and therefore, allocating its resources in the best possible way. The production possibility points along with the production possibility curve, which shows that there are limits to production. Thus, in accordance with achieving efficiency, and an economy has to decide the possible combination of goods and services (Carbaugh, 2010).
According to the possibility production frontier, there are three possible points A, B, and C, appearing on the curve. These three possible points must be selected by the nations because they represent the most efficient use of resources by an economy. According to the diagram (please see attachment), point X represents an inefficient use of resources; whereas point Y represents the goals that an economy cannot attain with its existing resources. As an example, if a country wants to produce more wine than cotton, then it must give up some of those resources ...
The response addresses the queries posted in 869 words with references.