Question

For PPF with variable costs, when does specialization stops?

Answer 1

An economy may be able to produce for itself all the goods and services it needs to function, using the PPF as a benchmark. However, in reality, this can lead to general inefficiencies in resource allocation and impede future growth when the gains from trade are taken into account.

Through specialization, a country can focus on producing just a few of the things it does best, rather than trying to do it all alone.