Refer to the accompanying graph. If the production possibilities curve for an economy is at CD but the economy is operating at point X, the reasons are most likely to be because of
A) technological progress and industrial change.
B) increases in the quantity and the quality of resources.
C) improvement in labor productivity and the number of work-hours.
D) unemployment and ineﬃcient allocation of resources.

Question

Refer to the accompanying graph. If the production possibilities curve for an economy is at CD but the economy is operating at point X, the reasons are most likely to be because of
A) technological progress and industrial change. 
B) increases in the quantity and the quality of resources. 
C) improvement in labor productivity and the number of work-hours. 
D) unemployment and ineﬃcient allocation of resources.

Quizplus · Accepted Answer

The production possibilities curve shows the maximum amount of goods and services an economy can produce with its available resources and technology. Point X on the graph indicates that the economy is producing below its potential level of output, which suggests there may be unused resources and inefficiencies in the allocation of resources. Therefore, the situation is likely due to unemployment and inefficient allocation of resources, which is represented by answer choice D. Answer choices A, B, and C suggest improvements in factors of production or productivity, which would lead the economy to produce at a higher point on the production possibilities curve. Since the economy is already below the curve, these options are not applicable.

Refer to the Accompanying Graph