In a graph of the production possibilities curve, the two axes of the graph indicate the
A) prices of the two products that a nation can produce.
B) maximum quantities of the two resources that a nation possesses.
C) price of the products on the vertical axis, and quantities on the horizontal.
D) quantities of the two products that a nation can produce.

Question

Quizplus · Accepted Answer

The production possibilities curve shows the maximum output combinations of two products that an economy can produce with its available resources and technology. Therefore, the two axes of the graph represent the maximum quantities of the two products that can be produced by allocating the available resources efficiently. Choice A is incorrect because the production possibilities curve does not provide information on prices but rather on production quantities. Choice B is also incorrect because although the resources are important in determining the production possibilities, the graph does not indicate the maximum quantities of resources available. Choice C is incorrect because the positioning of the products (vertical or horizontal) does not matter as long as the two axes show the maximum production possibilities.

In a Graph of the Production Possibilities Curve, the Two