The production possibility frontier illustrates that:
A)the economy will automatically end up at full employment.
B)an economy's productive capacity increases proportionally with its population.
C)if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
D)economic production possibilities have no limit.

Question

Quizplus · Accepted Answer

The production possibility frontier illustrates the maximum amount of two goods that can be produced with the given resources and technology. It shows that in order to produce more of one good, some amount of the other good must be given up. This is the concept of opportunity cost, and it arises because resources are scarce and must be allocated efficiently. The PPF does not imply that the economy will automatically end up at full employment (A) or that an economy's productive capacity increases proportionally with its population (B). It also does not imply that economic production possibilities have no limit (D) as there are always finite resources and technological constraints on production.

The Production Possibility Frontier Illustrates That