If the production possibilities frontier of one trade partner ("Country A")is bowed out (concave to the origin),then increased specialization in production by that country will
A) increase the economic welfare of both countries.
B) increase the economic welfare of only Country A.
C) decrease the economic welfare of Country A.
D) decrease the economic welfare of Country B.
E) not affect the economic welfare of either country.

Question

Quizplus · Accepted Answer

A bowed out PPF implies that the opportunity cost of producing one good is rising as more of it is produced. Therefore, when Country A specializes in producing the good in which it has a comparative advantage, it will give up less of the other good as compared to Country B, thereby increasing economic welfare for both countries. This is because Country B can then obtain the good from Country A at a lower price than it would have been able to produce on its own, and Country A can trade its surplus for goods that it cannot produce efficiently.

If the Production Possibilities Frontier of One Trade Partner ("Country