A-LevelEconomicsInternational economic issues9708/12 · May/June 2011 · Q181 Mark
Each diagram shows the production possibility curves of two economies, X and Y, which produce food and clothes. In which diagram would both economies benefit by specialising in the good in which they have comparative advantage and trading at an exchange rate of 1 unit of clothes to 1.5 units of food?
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ADiagram showing PPC X from (0 clothes, 4 food) to (2 clothes, 0 food) and PPC Y from (0 clothes, 3 food) to (1 clothes, 0 food).
BDiagram showing PPC X from (0 clothes, 5 food) to (4 clothes, 0 food) and PPC Y from (0 clothes, 4 food) to (5 clothes, 0 food).
CDiagram showing PPC X from (0 clothes, 4 food) to (2 clothes, 0 food) and PPC Y from (0 clothes, 4 food) to (5 clothes, 0 food).
DDiagram showing PPC X from (0 clothes, 4 food) to (2 clothes, 0 food) and PPC Y from (0 clothes, 2 food) to (4 clothes, 0 food).
✓ Correct answer
C: Diagram showing PPC X from (0 clothes, 4 food) to (2 clothes, 0 food) and PPC Y from (0 clothes, 4 food) to (5 clothes, 0 food).
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