QUESTION 14 Figure 2: The line labheled PPF is Spain\'s production possblity sch

Question

QUESTION 14 Figure 2: The line labheled PPF is Spain's production possblity schedule(frontier) and the ine lbele tt s rade possblity frontier (the internalina terms d tade ine). The coordinates of point D are (12, 12), of point R are (28, 0) and of point M are (16, 18) 18 15 12 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Refrigerators Based on the information given and Figure 2. what JS the maximun number of refrigerator Spain can produce it it produces 15 TVs 0 A 5 refrigerators O B 28 refrigorators O C 1 refrigerator D B refrigorators

Explanation / Answer

The maximum number of refrigerators Spain can produce is 8 refrigerators ,if it produces 15 TVs. As it can be seen from the Spain's PPF. Hence, option(D) is correct.

When Spain does not participate in international trade, the relative price of one refrigerator in terms of TVs in Spain = 21/28= 0.75 TVs. Hence, option(C) is correct.

Relative price of one refrigerator in terms of TVs in Spain when it participates in international trade = 1.5 TVs. Hence, option(C) is correct.

If Spain participated in international trade it could consume the bundle that lies outside the PPF , i.e 22 refrigerators and 9 TVs because it lies on the tt line. Hence , option(C) is correct.

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