21. A production possibilities frontier will be a straight line if, a. Increasin

Question

21. A production possibilities frontier will be a straight line if, a. Increasing the production of one good by x units entails no opportunity cost in terms of the other good. b. Increasing the production of one good by x units entails a constant opportunity cost in terms of the other good. c. The economy is producing efficiently. d. The economy is engaged in trade with at least one other economy. 22. Which of the following is not consistent with the theory of comparative advantage? a. Developing countries may not have enough resources to trade with b. Countries will likely export goods and services for which they have a lower c. Countries can benefit from importing goods that they have an absolute d. A country with an absolute advantage in the production of a good may not developed countries. opportunity cost of production. advantage in. have a comparative advantage in the production of that good (relative to one other country) 23. Without trade, a. a country is better off because it will have to learn to be self-sufficient without trade, b. a country's production possibilities frontier is also its consumption possibilities frontier. c. a country can still benefit from international specialization. d. None of the above is correct.

Explanation / Answer

(21) (b)

A straight-line PPF signifies constant opportunity cost.

(22) (a)

As per theory of comparative advantage, benefits from trade is decided by the opportunity costs of production and not by resource endowment of the trading partners.

(23) (b)

In absence of trade, a country consumes what it produces, so PPF and CPF are the same.

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