The production possibilities curve illustrates the basic principle that
A)an economy's capacity to produce increases in proportion to its population size.
B)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.
C)an economy will automatically seek that level of output at which all of its resources are employed.
D)the production of more of any one good will in time require smaller and smaller sacrifices of other goods.

Question

Quizplus · Accepted Answer

The production possibilities curve shows the maximum combinations of two goods that an economy can produce with its existing resources and technology. It illustrates the principle of scarcity: if an economy wants to produce more of one good, it can do so only by diverting scarce resources from the production of another good. Thus, any movement along the curve involves a tradeoff between the two goods. The curve is bowed outward (concave) because resources are not equally productive in all uses. As more of one good is produced, its marginal opportunity cost in terms of the other good increases. Therefore, producing more of any one good will require increasingly larger sacrifices of the other good.

The Production Possibilities Curve Illustrates the Basic Principle That