The production possibilities curve illustrates the basic principle that
A) the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
B) an economy will automatically obtain full employment of its resources.
C) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
D) an economy's capacity to produce increases in proportion to its population size.

Question

Quizplus · Accepted Answer

The production possibilities curve shows the maximum combinations of two goods that can be produced in an economy given its resources and technology. It illustrates the principle of opportunity cost, which means producing more of one good can only happen if resources are shifted away from producing another good, resulting in a tradeoff. Therefore, if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. Choices A, B, and D are incorrect as they do not accurately describe the principle illustrated by the production possibilities curve.

The Production Possibilities Curve Illustrates the Basic Principle That