Refer to the above diagram.If the production possibilities curve for an economy is at AB but the economy is operating at point 4, the reasons are most likely to be because of:

Question

Quizplus · Accepted Answer

If the production possibilities curve is at AB, it means that the economy is capable of producing at least as much of one good as it sacrifices to produce more of the other good. Therefore, the economy can produce at point 4 or any other point on the production possibilities curve. The fact that the economy is operating at point 4 suggests that it is not fully utilizing its resources, which could be due to demand factors such as lack of market demand for the goods or inefficient production processes. Therefore, the reasons are most likely to be because of demand and efficiency factors.

Refer to the Above Diagram