Refer to the above figure. We are currently producing at point c. Which of the following statements is TRUE?
A) Resources are not being efficiently utilized.
B) Resources are being efficiently utilized.
C) The only way to produce more of Goods X or Y is to have an increase in the amount of resources.
D) The Law of Increasing Additional Cost does not hold.

Question

Quizplus · Accepted Answer

CAt point c, the economy is not on the production possibilities frontier (PPF), indicating that resources are not being efficiently utilized, which makes statement A true. Since the economy is inside the PPF, it can produce more of Goods X or Y without an increase in the amount of resources by moving towards the PPF, making statement C incorrect in the context it's likely intended but accurately reflects that at point c, more goods can be produced with the current resources, contradicting the direct interpretation of choice C. Choices B and D are incorrect because resources are not being efficiently utilized at point c, and the Law of Increasing Additional Cost is a principle that applies when an economy is operating along the PPF, which involves trade-offs in production.

Refer to the Above Figure