Question

A production possibilities curve

A. represents all possible combinations of maximum outputs that could be​ produced, assuming a fixed amount of productive resources of a given quality.

B. shows the possibilities available for increasing the output of one good or service by reducing the amount of another.

C. defines the maximum quantity of one good or service that can be​ produced, given that a specific quantity of another is produced.

D. All of the above.

Answer 1

Answer : A production possibilities curve shows all of the above. A production possibility curve shows that maximum possible output combination of two goods or services an economy can producedwhen all resources are fully utilised. The main motive behind the production possibility curve is that with resources how much amount of goods has been produced effectively. It also shows that possibility of increasing one output resulted in decreasing output of another. It means that resources has been used more in one output production where as the result is that another output start decreasing. It also shows the maximum limit of goods and services that can be produced with the specific amount of goods and services in that particular economy only.

Production possibility curve has various features :

• Combination of goods produced with available resources
• As one goods production increase another goods decreased
• Oppournity cost in terms of another goods has been easily determined