The production possibility frontier illustrates that:

A) the economy will automatically end up at full employment.
B) an economy's productive capacity increases one-for-one with its population.
C) if all resources of an economy are being used efficiently,more of one good can be produced only if less of another good is produced.
D) economic production possibilities have no limit.

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Adrianne Lemcke · Accepted Answer

Final Answer : C, Explanation :  The production possibility frontier shows the maximum combination of two goods that can be produced with the given resources and technology. If an economy is already using all its resources efficiently, then producing more of one good means producing less of another good since the resources are limited. Therefore, if an economy wants to produce more of one good, it has to give up some quantity of another good. This is represented by the downward slope of the production possibility frontier. Option A is incorrect because the production possibility frontier shows potential possibilities and not the actual state of employment. Option B is incorrect because the production possibility frontier does not depend on population alone, but also on technology, resources, and skills. Option D is incorrect because resources are limited and therefore, production possibilities are also limited.

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