Suppose that an economy is operating inside its production possibilities frontier.Which statement best describes what is happening in this economy?

Question

Quizplus · Accepted Answer

If an economy is operating inside its production possibilities frontier, it means it is not using all of its available resources efficiently. This implies that there are some resources that are unemployed, and therefore, not contributing to the production of goods and services. Option A is the best answer as it reflects this situation accurately. Option B is incorrect because it assumes that the government is making production decisions, which may not necessarily be the case. Option C is a general statement about the nature of scarcity, which is not specifically related to the situation described in the question. Option D is also a true statement, but it does not describe the specific situation of an economy operating inside its production possibilities frontier.

Suppose That an Economy Is Operating Inside Its Production Possibilities