Which of the following is a specific assumption underlying the production possibilities frontier (PPF)?

• A. There is an unlimited supply of resources.
• B. The economy produces only one good.
• C. The level of technology changes frequently during production.
• D. Resources are fully employed and used efficiently.

Answer: (D)

Verified step by step guidance

1. Understand that the Production Possibilities Frontier (PPF) represents the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
2. Recall that the PPF assumes resources are scarce, so the economy cannot produce unlimited amounts of goods; therefore, the assumption of unlimited resources is incorrect.
3. Recognize that the PPF typically involves the production of two goods, not just one, so the assumption that the economy produces only one good is incorrect.
4. Note that the PPF assumes technology is constant during the production period, so frequent changes in technology are not part of the standard assumptions.
5. Identify that a key assumption of the PPF is that resources are fully employed and used efficiently, meaning the economy operates on the frontier rather than inside it.