Question

explain one of the economic concepts:

• International trade
• Comparative advantage
• Absolute advantage
• Production possibilities curve
• Exports and imports
• International specialization
• Gains from trade
• Barriers of trade: Tariffs and quotas
• Foreign exchange
• Flexible exchange rate
• Fixed exchange rates

Answer 1

Since the production possibility can be defined as a line or curve which is summation of different combinations of two different goods which can be produced with the available resources by using it efficiently. If the technology improves or resources increase, then the PPF shifts outwards.

Any production point outside the production possibilities frontier is unattainable.

Hence point F and E are unattainable.

Any production point inside the production possibilities frontier is inefficient.

Hence point D and C are inefficient.

Any production point on the production possibilities frontier is efficient.

Hence point A and B are efficient.

Any point either on PPF or under PPF are attainable.

Hence point A, B, C and D are attainable.

All this has been shown in the below diagram.