If an economy is operating inside its production possibilities curve for consumer goods and capital goods, this means that it:
A)can only produce more consumer goods by producing fewer capital goods.
B)can only produce more capital goods by producing fewer consumer goods.
C)can produce more of both consumer goods and capital goods by using its resources more efficiently.
D)must improve its technology to produce more output.

Question

Quizplus · Accepted Answer

Operating inside the production possibilities curve means that the economy is not utilizing its resources efficiently. Therefore, it can produce more of both consumer goods and capital goods by using its resources more efficiently. Choice A and B are incorrect because they suggest that the economy can only produce more of one type of good by producing less of the other type. Choice D may be a factor in increasing production, but it is not the only solution when an economy is operating inside its production possibilities curve.

If an Economy Is Operating Inside Its Production Possibilities Curve