The production possibilities curve:
A)shows all of those levels of production which are consistent with a stable price level.
B)indicates that any combination of goods lying outside the curve is economically inefficient.
C)is a frontier between all combinations of two goods which can be produced and those combinations which cannot be produced.
D)shows all of those combinations of two goods which are most preferred by society.

Question

Quizplus · Accepted Answer

The production possibilities curve represents the frontier between all combinations of two goods that can be produced (efficiently) and those combinations that cannot be produced. This is because the resources in an economy are limited, so there is a maximum amount of output that can be produced given the available resources and technology. The curve shows the trade-off between producing one good versus the other, and any point inside the curve represents an inefficient use of resources. The curve does not indicate anything about price levels or societal preferences.

The Production Possibilities Curve