The production possibilities curve represents the fact that:
A) the economy will automatically end up at full employment.
B) an economy's productive capacity increases proportionally with its population.
C) if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
D) economic production possibilities have no limit.

Question

Quizplus · Accepted Answer

The production possibilities curve illustrates the concept of opportunity cost, meaning that a choice to produce more of one good will require sacrificing production of another good, assuming that the economy is operating at full employment and using all resources efficiently. This is because resources, such as labor and capital, are limited and have alternative uses, so trade-offs must be made between competing uses of resources. The curve is generally concave due to increasing opportunity costs, meaning that as more of one good is produced, the opportunity cost of producing an additional unit of that good increases, reflected in the sacrifice of producing less of the other good.

The Production Possibilities Curve Represents the Fact That