If production in the economy is efficient, then changes in market prices

Question

Quizplus · Accepted Answer

If production in the economy is efficient, then the economy is already producing at its maximum capacity on the production possibilities curve. Changes in market prices will cause a movement along the curve, as the economy reallocates resources and produces different combinations of goods and services to maximize profits or minimize losses. However, the economy cannot produce beyond its capacity on the production possibilities curve without increasing its resources or improving its technology. Therefore, option A is the best choice.

If Production in the Economy Is Efficient, Then Changes in Market