Economics Production Possibility Frontier Questions
In a closed economy, the production possibility frontier represents the maximum combination of goods and services that can be produced given the available resources and technology within the country. It does not take into account any international trade or interactions with other economies.
On the other hand, in an open economy, the production possibility frontier considers the potential gains from trade with other countries. It reflects the maximum combination of goods and services that can be produced domestically, as well as the additional possibilities that arise from importing and exporting goods and services.
Therefore, the main difference between a closed economy and an open economy in relation to the production possibility frontier is that the latter takes into account the potential benefits of international trade, expanding the range of possibilities beyond what can be achieved in a closed economy.