Which of the following statements is true?

Question

a. Self-sufficiency is the road to prosperity for most countries.
b. Only countries with an absolute advantage in the production of every good should strive to be self-sufficient.
c. A self-sufficient country consumes outside its production possibilities frontier.
d. A self-sufficient country at best can consume on its production possibilities frontier.

Answer 1

The correct statement is:

d. A self-sufficient country at best can consume on its production possibilities frontier.

This statement is true because a self-sufficient country produces and consumes only what it can produce itself, meaning it can only consume at levels represented by its production possibilities frontier (PPF). It does not have access to goods produced by other countries, so it cannot consume beyond that frontier without trade.

The other options are either misleading or incorrect:

a. Self-sufficiency does not necessarily lead to prosperity for most countries; trade often allows countries to specialize and benefit from comparative advantages.

b. A country does not need to have an absolute advantage in all goods to strive for self-sufficiency; the concept of comparative advantage suggests that countries can benefit from specializing in goods where they have a relative efficiency.

c. A self-sufficient country cannot consume outside its production possibilities frontier; such consumption requires trade or additional resources that exceed its current production capabilities.