Refer to the above production possibilities curves. Curve (a) is the initial curve for the economy, and the nation is initially producing combination P. A shift from curve (a) to curve (b) suggests that the economy can then increase its production of capital goods:
A) Only if it reduces its production of consumer goods
B) So as to produce the combination L
C) And consumer goods simultaneously
D) But will have to hold constant its production of consumer goods

Question

Refer to the above production possibilities curves. Curve (a) is the initial curve for the economy, and the nation is initially producing combination P. A shift from curve (a) to curve (b) suggests that the economy can then increase its production of capital goods:
A) Only if it reduces its production of consumer goods 
B) So as to produce the combination L 
C) And consumer goods simultaneously 
D) But will have to hold constant its production of consumer goods

Quizplus · Accepted Answer

The shift from curve (a) to curve (b) suggests that the economy is able to produce more capital goods and consumer goods simultaneously. This means that the nation can increase its production of capital goods without having to reduce production of consumer goods or hold its production of consumer goods constant. Therefore, option C is the correct choice.

Refer to the Above Production Possibilities Curves