Question

What does a production possibilities frontier show? a. scarce and less scarce resources b. global trade-offs and costs of doing business c. an economy that is producing but not at the maximum d. the maximum amount that an economy can produce

Answer 1

A production possibilities frontier, or PPF, shows the D. maximum amount that an economy can produce. It is shown in a graph as a curve, and if the economy is shown as below the curve then they are operating inefficiently.

Answer 2

The correct answer is D. A production possibilities frontier shows the maximum amount that an economy can produce.

The production possibility frontier is a marginalist model that reflects the maximum quantities of goods and services that a country or enterprise is capable of producing in a given period and based on certain production factors and technological knowledge. Therefore there are three situations in the productive structure of a country or enterprise:

-Inefficient productive structure: When it is below the PPF, that is, either all resources are not used (idle resources), or the technology is not adequate.

-Efficient productive structure: It is located in front of the border or very close to it. There are no idle resources and the best technology is being used.

-Unattainable productive structure: It is above the production possibilities. It is theoretical since no country or enterprise can produce beyond its capability.