Refer to the above graph. If the production possibilities curve for an economy is at CD but the economy is operating at point X, the reasons are most likely to be because of:

Question

Quizplus · Accepted Answer

If an economy is operating at point X, it means that it is producing below its potential, which is indicated by the production possibilities curve at CD. Therefore, the reasons are most likely to be unemployment and/or inefficient allocation of resources. Technological progress and industrial change, increases in the quantity and the quality of resources, and improvement in labor productivity and the number of work-hours would shift the production possibilities curve outward, allowing the economy to produce more at any given point, but they would not explain the economy's current position relative to its potential.

Refer to the Above Graph