Figure 1.3

-When constructing a production possibility curve for an economy, which of the following is assumed to be constant?

Question

Figure 1.3
 
-When constructing a production possibility curve for an economy, which of the following is assumed to be constant?

Quizplus · Accepted Answer

When constructing a production possibility curve, the quantity of resources is assumed to be constant. This means that the amount of land, labor, and capital available for production is the same for all points on the curve. This assumption allows us to isolate the relationship between the production of two goods and see the opportunity cost of producing one good in terms of the other. The government budget, quantity of goods produced, price level, and money supply are all variables that can change and shift the production possibility curve.

Figure 1.3 -When Constructing a Production Possibility Curve for an Economy, Which