A Production Possibilities Curve Graphically Represents the Maximum Quantities of Two

question 153

Multiple Choice

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

• A) it lacks the resources necessary to produce at full employment.
• B) it is utilizing some resources inefficiently.
• C) it does not confront the problem of scarce goods relative to unlimited wants.
• D) it does not exist in the real world since it is impossible for an economy to operate inside its production possibilities curve.

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Definitions:

Depreciation

The gradual reduction in the economic value of the physical assets of a company due to wear and tear over time, or the loss in value of a currency.

NDP

Net Domestic Product; it calculates the total value of all goods and services produced within a country in a specific period minus depreciation.

Intermediate Product

Goods that are used in the production process to make other goods, rather than being bought by consumers.

National Income Accountants

Specialists who compile national accounts, a system of accounts that provides detailed information on the economic activities and output of a nation, such as GDP, national income, and expenditure.