When a nation is in autarky (a no-trade state) and maximizes its living standard, its consumption and production points are:
A) along its production possibilities frontier.
B) above its production possibilities frontier.
C) beneath production possibilities frontier.
D) along, above, or beneath its production possibilities frontier.

Question

Quizplus · Accepted Answer

In autarky, a nation can only consume what it produces domestically. Therefore, to maximize its living standard, it must produce at a point on its production possibilities frontier where it can allocate its resources most efficiently. This means that its consumption and production points will be along its production possibilities frontier.

When a Nation Is in Autarky (A No-Trade State) and Maximizes