If two countries have identical production possibility frontiers,then trade between them is likely to be beneficial if
A) their supply curves are identical.
B) their cost functions are identical.
C) their demand conditions are identical.
D) their incomes are identical.
E) their demand functions differ.

Question

Quizplus · Accepted Answer

If the demand functions differ between the two countries, then there may be an opportunity for mutually beneficial trade. For example, if one country has a higher demand for a particular good than the other, then that country could specialize in producing and exporting that good while the other country specializes in producing and exporting another good. This would result in both countries being able to consume more of both goods through trade than they would be able to produce on their own. Alternatively, if there is no difference in demand between the two countries, then there would be no reason for trade as both countries would have the same preferences for the goods they produce.

If Two Countries Have Identical Production Possibility Frontiers,then Trade Between