A Production Possibilities Curve Graphically Represents the Maximum Quantities of Two

question 158

Multiple Choice

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve

• A) is using its resources inefficiently.
• B) lacks the necessary technology to produce efficiently.
• C) lacks the resources to produce goods efficiently.
• D) is utilizing its available resources as efficiently as possible.

---

Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production volume.

Shut Down

A short-term decision by a firm to cease operations temporarily due to unfavorable market conditions.

ATC Curve

Average Total Cost Curve; a graph that shows the per-unit cost of production at every level of output.

AVC Curve

Average Variable Cost Curve, it represents the change in variable cost associated with producing more units of a good or service.