Suppose the economy is at its potential output level.Which of the following best characterizes how the economy is producing?
A) The economy is producing less than it is capable of producing.
B) The economy is producing the maximum it can produce given resource constraints.
C) The economy is producing beyond its productive capacity.
D) The economy is producing at its minimum capacity.

Question

Suppose the economy is at its potential output level.Which of the following best characterizes how the economy is producing?  
A) The economy is producing less than it is capable of producing. 
B) The economy is producing the maximum it can produce given resource constraints. 
C) The economy is producing beyond its productive capacity. 
D) The economy is producing at its minimum capacity.

Quizplus · Accepted Answer

When the economy is at its potential output level, it means that it is already producing the maximum output it can produce given its resource constraints. Therefore, option B is the correct choice. Option A is incorrect because the economy is not producing less than it is capable of producing when it is at its potential output level. Option C is incorrect because the economy cannot produce beyond its productive capacity. Option D is incorrect because the economy is not producing at its minimum capacity when it is at its potential output level.

Suppose the Economy Is at Its Potential Output Level