Question

In autarky, when a country maximizes its utility, its consumption point is(a)below the production possibility frontier.(b)on the production possibility frontier.(c)above the production possibility frontier.(d)cannot tell without more information.

Answer 1

Answer:

(d)cannot tell without more information.

Explanation:

Autarkic economy is a self reliant economy, consuming entirely from its own production.

An autarkic economy maximises its utility when : Its PPF & Social Indifference Curve are tangent to each other.

• PPF is sort of a budget constraint to economy, because it denotes maximum production potential with given resources & technology.
• Social Indifference Curve is the curve denoting product combinations yielding same level of social satisfaction.

Their tangency gives utility maximising point with the available resources & technology.

Other options are inapt because: Production on PPF is a necessary but not sufficient condition for social utility maximisation (tangency also needed). Production under PPF reflects under utilisation of resources, cant be utility maximising. Production above PPF is unattainable.