Exhibit 2-9 Refer to Exhibit 2-9. If Alex and Adam each specialize in the good in which he has a comparative advantage and then engage in trade, ____________________ can consume a combination of goods that lies beyond their PPF.
A)Alex, but not Adam,
B)Adam, but not Alex
C)Alex and Adam
D)neither Alex nor Adam

Question

Exhibit 2-9  Refer to Exhibit 2-9. If Alex and Adam each specialize in the good in which he has a comparative advantage and then engage in trade, ____________________ can consume a combination of goods that lies beyond their PPF.
A)Alex, but not Adam, 
B)Adam, but not Alex 
C)Alex and Adam 
D)neither Alex nor Adam

Quizplus · Accepted Answer

According to the principle of comparative advantage, both Alex and Adam should specialize in producing the good in which they have a lower opportunity cost (i.e., their comparative advantage). Then they should trade with each other to consume a combination of goods that lies beyond their individual production possibility frontiers (PPF). Therefore, both Alex and Adam can consume a combination of goods that lies beyond their PPF.