The Production Possibilities Frontier represents:
A)All consumption good allocations in an Edgeworth box that are exchange efficient.
B)all input allocations in an Edgeworth box for inputs that are input efficient.
C)All possible combinations of consumption goods that can be produced in an economy given the economy's available supply of inputs.
D)the different combinations of capital and labor inputs that will produce a given level of output for a particular good.

Question

Quizplus · Accepted Answer

The Production Possibilities Frontier (PPF) shows all possible combinations of two goods or services that can be produced with a given set of resources and technology, assuming all resources are being used efficiently. Therefore, option C correctly represents the PPF. Option A refers to exchange efficiency, which is not directly related to production. Option B refers to input efficiency, which is also not directly related to the PPF. Option D refers to the production function, which is different from the PPF. The Production Possibilities Frontier (PPF) represents all possible combinations of consumption goods that can be produced in an economy given the economy's available supply of inputs. It shows the maximum amount of one good that can be produced for every possible level of production of the other good. The PPF assumes that all inputs are used efficiently and that resources are fixed. Therefore, any point outside of the PPF is unattainable with the current level of inputs, and any point inside the PPF represents inefficiency or underutilization of inputs.

The Production Possibilities Frontier Represents