Question

***30 POINTS EASY IF U KNOW ECONOMICS***

A country in autarky would consume at a point _____ its PPF, while a country that engages in trade would consume at a point _____ its PPF.
a) to the left of; to the right of
b) on; to the left of
c) on; to the right of
d) to the left of; on

Answer 1

Answer: c). On the PPF and to the right of its PPF.

Explanation: A PPF shows all possible combination of goods that can be produced using the limited resources of a country. Below the PPF are points that under-utilise the resources, while above to the right of the PPF are points that over-utilise the resources. When a country is in autarky, the best it can do is to produce on its PPF so that its resources are used efficiently.

While, when a country engages in trade it produces the good in which it has a comparative advantage (lower opportunity cost) and trades it with the other country. So, in this way the country is able to get more of both the goods with trade. Thus, after trade combination of goods will lie to the right of the PPF.

Thus, the correct option is c, on the PPF and to the right of the PPF.