Using Figure 1.5,if an economy has the capacity to produce represented by PP2,then point E represents
A)A constant trade-off between potato chips and doughnuts.
B)A combination of potato chips and doughnuts that is not attainable.
C)An efficient use of resources.
D)None of the choices are correct.

Question

Using Figure 1.5,if an economy has the capacity to produce represented by PP2,then point E represents
A)A constant trade-off between potato chips and doughnuts. 
B)A combination of potato chips and doughnuts that is not attainable. 
C)An efficient use of resources. 
D)None of the choices are correct.

Quizplus · Accepted Answer

Point E represents an efficient use of resources because it is on the production possibility frontier (PPF) of the economy. This means that the economy is producing the maximum amount of both potato chips and doughnuts that it can with its given resources and technology. Any point inside the PPF would represent an inefficient use of resources, while any point outside the PPF would be unattainable with the current resources and technology.