One of the Assumptions Underlying the Production Possibilities Curve Is

question 298

Multiple Choice

One of the assumptions underlying the production possibilities curve is that

• A) at least one of the factors of production is a free good.
• B) the quantity of the resources available for the production of economic goods is fixed over a given time period.
• C) there is at least one factor of production that is employed inefficiently.
• D) some of the factors of production are not being used.

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Definitions:

Production Possibility Frontier

A curve depicting the maximum attainable combinations of two products that may be produced with available resources and technology.

Increasing Opportunity Costs

The principle that as you increase production of one good, the opportunity cost of producing an additional unit of this good increases.

Constant Opportunity Costs

A condition in which the opportunity cost of producing one more unit of a good remains constant irrespective of the quantity.

Decreasing Opportunity Costs

A situation where the cost of forgoing the next best alternative decreases as more units of a product or service are produced.