One of the great benefits of trade, according to the concept of comparative advantage and the production possibilities frontier (PPF), is:

• A. It ensures that all countries produce the same goods.
• B. It allows countries to consume beyond their individual production possibilities frontiers.
• C. It guarantees equal distribution of resources among countries.
• D. It eliminates opportunity costs for all trading partners.

Answer: (B)

Verified step by step guidance

1. Understand the concept of the Production Possibilities Frontier (PPF), which represents the maximum combinations of two goods that a country can produce given its resources and technology.
2. Recall the principle of comparative advantage, which states that countries should specialize in producing goods for which they have a lower opportunity cost compared to other countries.
3. Recognize that by specializing and trading based on comparative advantage, countries can consume combinations of goods that lie beyond their individual PPFs, effectively increasing their consumption possibilities.
4. Note that trade does not mean all countries produce the same goods; rather, they specialize differently to maximize efficiency.
5. Understand that trade does not guarantee equal resource distribution or eliminate opportunity costs; instead, it allows countries to benefit from specialization and exchange, leading to higher overall welfare.