Figure 2-4 Which of the following is true of Figure 2-4?
A) If the economy operates at point A, it is impossible to produce more of both food and clothing.
B) If the economy operates at point B, it is impossible to increase the output of clothing without giving up food production.
C) If the economy operates at point A, resources are being used efficiently.
D) If the economy operates at point B, resources are being used inefficiently.

Question

Figure 2-4  Which of the following is true of Figure 2-4?
A) If the economy operates at point A, it is impossible to produce more of both food and clothing. 
B) If the economy operates at point B, it is impossible to increase the output of clothing without giving up food production. 
C) If the economy operates at point A, resources are being used efficiently. 
D) If the economy operates at point B, resources are being used inefficiently.

Quizplus · Accepted Answer

Point B represents a situation of producing more clothing but at the cost of reducing food production. This is because the economy is already operating at the limit of its production possibilities frontier. Therefore, to increase clothing production, resources must be shifted away from food production, making it impossible to increase both simultaneously. This reflects the concept of opportunity cost, where the cost of producing more of one good is the foregone production of another good.

Figure 2-4 Which of the Following Is True of Figure