If an economy is operating on its production possibility frontier,which of the following statements is true?
A)Products are produced using inefficient production technology.
B)The capacity utilization rate is less than full production.
C)The economy's labor force is fully employed.
D)A fall in the price of an input will enable the economy to produce outside the production possibility frontier.

Question

Quizplus · Accepted Answer

When an economy is operating on its production possibility frontier, it means that it is using all of its available resources (land, labor and capital) in the most efficient way possible. Therefore, the economy's labor force is fully employed. Choices A, B and D are incorrect because they imply that the economy is not operating at maximum efficiency or capacity.

If an Economy Is Operating on Its Production Possibility Frontier,which