Production and consumption will occur where the production possibility frontier and the indifference curve are parallel.

Name: Production and consumption will occur where the production possibility frontier and the indifference curve are parallel.
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Question

Quizplus · Accepted Answer

Production and consumption occur where the marginal rate of substitution equals the relative price of the two goods. This occurs where the indifference curve is tangent to the production possibility frontier, not where they are parallel.

Production and Consumption Will Occur Where the Production Possibility Frontier