Exhibit 2-7 Production possibilities curve For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point A?

Question

Exhibit 2-7  Production possibilities curve  For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point A?

Quizplus · Accepted Answer

Point A represents a production point where the economy is producing 50 units of cars and 200 units of grain. If the economy wants to produce more grain, it must decrease the production of cars. Therefore, to produce more grain in the same period, some car production must be forgone. Option A is incorrect as there is no information given about the demand for cars. Option B may be true, but it is not necessarily indicative of the economy being at point A. Option D is incorrect as the production possibilities curve does not indicate the absolute limit of production, rather it represents the efficient use of resources.

Exhibit 2-7 Production Possibilities Curve for the Economy Shown in Exhibit