overflow and subsequent boxes

Refer to the attached example. It is clear to me that the value of
"overflow" should not affect the size of the box, and thus not affect where
the border is drawn. What isn't clear to me is how the following box should
be positioned. Should it start at the end of the overflowed text, or should
it be adjacent the boundary of the previous box, just as if text had not
overflowed?

Braden