Suppose that an economy is currently producing at a point that lies inside of its production possibilities set.Which of the following would best explain this circumstance?
A) The economy does not have enough resources to produce at a point closer to the frontier of the production possibilities set.
B) The prevailing level of technology prevents the economy from producing at a point closer to the frontier of the production possibilities set.
C) The economy is experiencing a high level of unemployment.
D) Any of the above statements could explain this situation.
E) None of the above statements could explain this situation.

Question

Quizplus · Accepted Answer

The economy is experiencing a high level of unemployment, which means not all resources are being used efficiently, causing production to be inside the production possibilities set.

Suppose That an Economy Is Currently Producing at a Point