The more institutional constraints that exist in a particular society,
A) the closer the institutional PPF will lie to the physical PPF.
B) the farther out from the origin the institutional PPF will lie.
C) the closer to the origin the institutional PPF will lie.
D) the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie.

Question

Quizplus · Accepted Answer

Institutional constraints refer to the limitations imposed by the legal, political, and social institutions of a society on the production and consumption of goods and services. The institutional PPF represents the maximum level of production that can be achieved within these constraints. The closer the institutional PPF lies to the origin, the more limited the production possibilities due to the constraints. Therefore, as the number of institutional constraints increases, the institutional PPF will move closer to the origin, which is reflected by choice C.

The More Institutional Constraints That Exist in a Particular Society