When an economy is operating inside its production possibilities frontier, what do we know?
A) There are unused resources or inefficiencies in the economy.
B) The economy is operating with efficiency.
C) Moving to a point on its production possibilities frontier would illustrate economic growth.
D) To produce more of one good, the economy would have to give up some of the other good.

Question

Quizplus · Accepted Answer

When an economy is operating inside its production possibilities frontier, it means that it is not utilizing all of its available resources efficiently. There are idle resources such as labor or capital that could be deployed to produce more goods and services. Therefore, the economy could produce more without sacrificing any other type of output. Thus, the correct answer is A because it implies that there are unused resources or inefficiencies in the economy.

When an Economy Is Operating Inside Its Production Possibilities Frontier