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A-Level Economics · Comparative advantage and the gains from trade diagram question

This country specialises in the good where its opportunity cost is lowest. Which point shows what it PRODUCES?

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The diagram

The answer

Point P. P — every resource into services, the good this country gives up least to produce. Production and consumption are the same point only when there is no trade. Here the country produces at P, specialising completely in services, and then trades along the terms-of-trade line to consume somewhere else entirely.

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This is one of 6 questions on the comparative advantage and the gains from trade diagram — every corner lettered, every wrong answer diagnosed.

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