Which of the following statements is correct?
A) If capital is idle, the economy is producing at its full potential.
B) The production possibilities frontier shows that there are no limits to production.
C) A tradeoff is a limit that forces an exchange or a substitution of one thing for something else.
D) Any point on or within the PPF is production efficient.
E) None of the above answers are correct.

Question

Quizplus · Accepted Answer

A tradeoff is defined as a situation where a choice must be made between two or more options, each with its advantages and disadvantages, and the choice implies giving up something (or sacrificing something) to gain something else. Therefore, option C is the only correct statement among the choices given. A, B, and D are incorrect: if capital is idle, there is a waste of resources and an economy cannot produce at its full potential; the production possibilities frontier represents the limits to production given available resources and technology, and any point inside the frontier is production inefficient; any point on or beyond the PPF is production efficient, but not all points within the PPF are.

Which of the Following Statements Is Correct