Refer to the above production possibilities curves. Curve (a) is the initial curve for the economy. If the economy's production possibilities then shift to curve (b), then:
A) Point N would still indicate a case of full production and full employment of resources
B) Point P would still indicate a case of full production and full employment of resources
C) Point N would indicate some unemployment or underemployment of resources
D) Point L would indicate some unemployment or underemployment of resources

Question

Refer to the above production possibilities curves. Curve (a) is the initial curve for the economy. If the economy's production possibilities then shift to curve (b), then:
A) Point N would still indicate a case of full production and full employment of resources 
B) Point P would still indicate a case of full production and full employment of resources 
C) Point N would indicate some unemployment or underemployment of resources 
D) Point L would indicate some unemployment or underemployment of resources

Quizplus · Accepted Answer

When the economy's production possibilities shift from curve (a) to curve (b), there is an increase in the production of one good without a decrease in the production of the other. This means that the economy can produce more of both goods or choose to produce the same amount of goods with fewer resources. Therefore, point N, which was previously indicating a case of full production and full employment of resources on curve (a), may now indicate some unemployment or underemployment of resources. However, point P, which was also indicating full production and full employment of resources on curve (a), still indicates the same on curve (b). Point L is not relevant to the question as it is not labeled on the graph.

Refer to the Above Production Possibilities Curves