Which of the following is NOT true regarding the productionpossibilities frontier (PPF)?
A)The PPF shows the combination of goods that a country can produce given its current productivity and supply of
Resources.
B)The PPF illustrates the trade-offs that exist in the production of goods.
C)The PPF shows that gains from trade are maximized when countries produce those goods for which they have the absolute
Advantage in production.
D)The PPF illustrates the fundamental ideas of scarcity and opportunity cost.

Question

Quizplus · Accepted Answer

The statement that the PPF shows that gains from trade are maximized when countries produce those goods for which they have the absolute advantage in production is not true. While the PPF does show the trade-offs that exist in the production of goods and illustrates the concepts of scarcity and opportunity cost, it does not necessarily dictate that countries should produce only goods for which they have absolute advantage. Comparative advantage, rather than absolute advantage, is typically the more important concept in determining trade patterns.

Which of the Following Is NOT True Regarding the Productionpossibilities