Which of the following best describes the concept of potential output?
A)The total output that can be produced when all factors of production (land,labour,and capital)are fully employed.
B)The total output that can be produced when the economy is in short-run economic equilibrium.
C)The total output that can be produced when all productive resources (land,labour,and capital)are used at their maximum capacity.
D)The total output that could be produced in the future when technological advances allow for a higher level of output.
E)The total output that could be produced if no productive resource (land,labour,and capital)was ever left idle.

Question

Quizplus · Accepted Answer

Potential output refers to the maximum level of output that an economy can produce when all factors of production are fully utilized. In other words, it is the level of output that can be achieved when the economy is operating at full employment and maximum capacity. Option A defines potential output in this sense, making it the correct choice.

Which of the Following Best Describes the Concept of Potential