Question
The production possibilities curve illustrates the basic principle that
a. an economy will automatically seek that output at which all of its resources are employed.
b. an economy’s capacity to produce increases in proportion to its population.
c. if all resources of an economy are in use, more of one good can be produced only if less of another is produced.
d. no opportunity cost exists in production.
a. an economy will automatically seek that output at which all of its resources are employed.
b. an economy’s capacity to produce increases in proportion to its population.
c. if all resources of an economy are in use, more of one good can be produced only if less of another is produced.
d. no opportunity cost exists in production.
Ask by Ortiz Rowe. in the United States
Mar 21,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
If all resources are used, producing more of one good means producing less of another.
Solution
The production possibilities curve (PPC) illustrates the trade-offs and opportunity costs that an economy faces when allocating its resources between different goods.
Let’s analyze the options:
a. An economy will automatically seek that output at which all of its resources are employed.
- This statement is not necessarily true. While an economy may strive for full employment of resources, it does not automatically achieve it.
b. An economy’s capacity to produce increases in proportion to its population.
- This statement is misleading. While population can influence production capacity, it does not directly correlate to proportional increases in production capacity.
c. If all resources of an economy are in use, more of one good can be produced only if less of another is produced.
- This statement is true and reflects the concept of opportunity cost, which is a fundamental principle illustrated by the PPC. It shows that resources are limited, and reallocating them to produce more of one good means producing less of another.
d. No opportunity cost exists in production.
- This statement is false. The PPC is specifically designed to illustrate the concept of opportunity cost, showing that producing more of one good comes at the expense of another.
Based on this analysis, the correct answer is:
c. if all resources of an economy are in use, more of one good can be produced only if less of another is produced.
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Bonus Knowledge
The production possibilities curve (PPC) is a visual representation of the trade-offs and opportunity costs that an economy faces when allocating its resources. For example, if a nation is at full production, shifting resources from producing cars to making more computers means producing fewer cars, as resources are limited. This curve helps to easily convey the concept of scarcity and how choices will always involve a sacrifice.
In real-world scenarios, businesses often use the concepts illustrated by the PPC to determine the most efficient allocation of resources. For example, a factory may need to decide whether to ramp up production of product A or product B. The PPC can guide the decision by highlighting the opportunity costs associated with increasing output for one product at the expense of the other, helping them strike a balance for maximum efficiency.
