Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when
A)neither person faces trade-off.
B)the frontiers are straight lines.
C)the frontiers are bowed out.
D)they choose not to trade with one another.

Question

Quizplus · Accepted Answer

When each person's production possibilities frontier represents their consumption possibilities, it implies that there is no trade between them. Trade allows individuals to consume beyond their production possibilities frontier by specializing and exchanging goods or services. Without trade, each person can only consume what they can produce, hence their consumption possibilities are limited to their production possibilities.

Suppose There Are Only Two People in the World