When drawing a production possibilities frontier,which of the following is held constant?
A) the amount of money in the economy
B) the available factors of production and the state of technology
C) the prices of goods and services
D) the quantity of the goods and services that are produced
E) None of the above because nothing is held constant when drawing the production possibilities frontier.

Question

Quizplus · Accepted Answer

When drawing a production possibilities frontier, the available factors of production (land, labor, capital, and entrepreneurship) and the state of technology are held constant. This means that we assume the economy has a fixed amount of resources and technology to produce goods and services. The amount of money in the economy (A) and the prices of goods and services (C) can change and affect the economy's production possibilities, but these factors are not held constant when drawing the production possibilities frontier. The quantity of goods and services produced (D) is the outcome of the production possibilities, not a constant in the model. Therefore, the correct answer is B.

When Drawing a Production Possibilities Frontier,which of the Following Is