Hi, Can anyone solve this question ? b. Consider the following figure on the pro

Question

Hi, Can anyone solve this question ?

b. Consider the following figure on the production possibility frontier (PPF) good 2 Production Possibility Frontier good Which of the following statements is/are completely correct? 1. As we move clockwise along the PPF, good 1 becomes cheaper relative to good 2. 2. In a closed economy, production point and consumption point must always coincide and be on the PPF. In an open economy, the production point moves counterclockwise if the economy opens up and good 1 is relatively more expensive on the world market. In an open economy, consumption and production point will usually not coincide. 3. 4. world market.

Explanation / Answer

Option 2. Because whatever a closed economy produces it would be consumed by its market

Option 3. As the economy is open and if the production is more than consumption then it may not coincide as it would export the excess good with its comparative advantage over the other economy.

Option 4. When the world market is relatively expensive and the economy has comparative advantage then it can export and earn from foreign trade.

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