Multiple Choice
According to the principle of diminishing marginal productivity, what happens as additional units of a variable input are added to a fixed input in the production process?
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2. Introductory Economic Models
Production Possibilities Frontier (PPF) - Introduction and Productive Efficiency
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
The construction of a production possibilities curve assumes which of the following?
A
Only one good can be produced in the economy.
B
Resources can be created or destroyed at will.
C
Technology is constantly changing during the analysis.
D
Resources are fully employed and used efficiently.
Verified step by step guidance1
Understand that a Production Possibilities Curve (PPC) represents the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
Recall the key assumptions behind the PPC: resources are fixed in quantity and quality, technology is constant, and resources are fully employed and used efficiently.
Analyze each option in the problem: 'Only one good can be produced' contradicts the PPC concept, which involves trade-offs between two goods.
Recognize that 'Resources can be created or destroyed at will' is unrealistic and not an assumption of the PPC; resources are fixed during the analysis.
Note that 'Technology is constantly changing' is not assumed; the PPC assumes technology is constant to isolate the effect of resource allocation.
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