Question

Compare and contrast autarky and trade. How does trade help nations attain a higher production possibilities frontier? According to David Ricardo and Heckscher-Ohlin how is the comparative advantage accomplish the aforementioned?

Answer 1

Comparison

Autarky keeps Economy close for international trades because they are self sufficient.

Trade within the economy can help our economy to be protected.

Contrast

Autarky:  It stops the growth of economy.

It doesn't allow the consumer to experience the better quality products.

Lead to Price discrimination in the economy.

Trade: Helps Economy to grow

Provide quality products to consumers

Avoid price discrimination by monopolist

​​​​​​ Production Possibilities frontier: Production Possibility frontier shows the combination of goods which can be produced with the given resources and technologies, where given resources are fully utilized per unit of time.

So basically trade can help you in increasing your resources and technologies and that will help in better productivity in an economy which will help in production possibility frontier.

As per David Ricardo 's Absolute cost advantage theory country may enjoy absolute cost advantage in production of both goods, it would be more beneficial for a country to specialize in the production of that commodity in which it grater competitive cost advantage.

For example India is can produce both spices and wheat and Japan can also produce both but Japan will have more cost disadvantage and India has cost advantage in producing both the goods but since both countries will be beneficial if one will produce more of spice one Will produce more wheat.

Hecksher-Ohlin model states that each nation is best suitable to produce the commodity that requires a large proportion of the factor which are relatively abundant. Conversely, each nation is least suitable to produce the community which requires a greater proportion of factor in which is scarce or available in small quantity.

So both the theory states that the country can achieve higher production possibility frontier through take, but only when they will producing more of those goods for which country is having abundance of resources.