2. Normally, one's production point is his/her consumption point under autarky. However, is this true if...

2. Normally, one's production point is his/her consumption point under autarky. However, is this true if two individuals/firms/countries are allowed to trade?

Solutions

Expert Solution

Answer: No; this is not true if trade is allowed.

In autarky:

There is only domestic business but no international trade. Therefore, whatever produced is consumed within the economy (country). This makes (supply = Demand) domestically.

In trade:

There is both – domestic business and international trade.

Production may not be equal to consumption always, since world price becomes a key factor.

Rahul Sunny answered 1 year ago

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