The production possibilities curve:
A)shows all levels of production that are consistent with a stable price level
B)indicates that any combination of products lying outside the curve is undesirable
C)shows how an economy actually employs its resources
D)shows all combinations of products that are most preferred by consumers
E)is a frontier between all combinations of products that can be produced and those combinations that cannot be produced

Question

Quizplus · Accepted Answer

The production possibilities curve illustrates the maximum amount of two different goods that an economy can produce with its given resources and technology. It also shows the boundary between attainable and unattainable combinations of goods. Any point underneath the curve is inefficient, while any point beyond the curve is unattainable with the current resources and technology available. Therefore, the correct option is (E) "is a frontier between all combinations of products that can be produced and those combinations that cannot be produced."

The Production Possibilities Curve