Figure 1 Barrels of oil The graph above shows the PPC for a

Figure 1 Barrels of oil The graph above shows the PPC for a country that can produce oil or televisions. The straight line is the trade line and CPC if production is at Point A 1.Is this country producing the optimal mix of oil and televisions to maximize its income? Carefully explain how you know

Solution

Yes, it is optimally producing oil and television as any point the PPC would be an optimal combination. Any point inside PPC is inefficient and outside PPC is unattainable. Hence At point A it is producing 4 units of television and 3 barrels of Oil