Final answer:
The intercept of the CPC after trade is found by determining where the consumption line intersects the consumption frontier, which corresponds to where the community's budget line, influenced by the world price, is tangent to the highest indifference curve. Equilibrium prices and quantities change from the domestic intersection of supply and demand curves to aligning with the world price, indicating exports and imports thru the difference between production and consumption.
Step-by-step explanation:
To find the intercept of the Consumption Possibilities Curve (CPC) after trade, one needs to determine the point where the consumption possibilities line intersects the consumption possibilities frontier. This is done by looking at the intersection of the community's budget line (reflecting the world price after trade) and the highest attainable community indifference curve, indicating the optimal consumption bundle. Essentially, the world price forms a tangent to the highest indifference curve the community can achieve, given its budget constraints. The equilibrium price and quantity in each country in a world without trade can be determined by the intersection of domestic supply and demand curves. When trade is allowed, the equilibrium price aligns with the world price, and the new equilibrium quantity is where the domestic supply curve intersects the world price line. The levels of exports and imports are shown on the respective supply and demand diagrams for each country, after the introduction of trade, by the difference between domestic production and consumption at the world price.