Introducing indifference curves into our trade model permits us to determine:
A) Where a nation chooses to locate along its production possibilities curve in autarky
B) The precise location of a nation's production possibilities curve
C) Whether absolute cost or comparative cost conditions exist
D) The currency price of one product in terms of another product

Question

Quizplus · Accepted Answer

Introducing indifference curves into our trade model allows us to determine a country's optimal consumption point and therefore where it chooses to locate along its production possibilities curve in autarky. Indifference curves represent a set of consumption bundles that give a consumer the same level of satisfaction, so a country will choose to consume at a point where it maximizes its utility.

Introducing Indifference Curves into Our Trade Model Permits Us to Determine