If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph,
A) the economy will always be at full employment.
B) more of one product can be produced without producing less of the other product.
C) the production possibilities curve would be a straight line.
D) the two products are of equal value to the economy.

Question

Quizplus · Accepted Answer

If economic resources are perfectly interchangeable between the two products, the production possibilities curve would be a straight line because the opportunity cost of producing one more unit of one product is the same as the opportunity cost of producing one more unit of the other product. This means that more of one product can be produced without producing less of the other product, and the economy can always be at full employment because resources are perfectly interchangeable. The value of the two products to the economy is not relevant to the interchangability of resources.

If Economic Resources Are Perfectly Interchangeable Between the Two Products