An economy's production possibilities frontier:
A)helps explain the immense complexity of the real economy.
B)demonstrates that,although resources are scarce for individuals,there is no problem of scarcity for society as a whole.
C)is based on unrealistic assumptions and therefore has no value as an economic tool.
D)is based on simplifying assumptions,but is still useful for illustrating scarcity,opportunity cost,and economic growth.
E)is based on the assumption that technology is constantly changing.

Question

Quizplus · Accepted Answer

The economy's production possibilities frontier is based on simplifying assumptions, but it is still useful for illustrating scarcity, opportunity cost, and economic growth. It shows the maximum possible combination of goods and services that an economy can produce given its resources and technology, which highlights the problem of scarcity and the need for efficient resource allocation. The frontier can also shift outward over time as technology improves, indicating potential for economic growth. While not capturing the full complexity of the real economy, the production possibilities frontier remains a fundamental tool for understanding key economic concepts.

An Economy's Production Possibilities Frontier