Multiple Choice
Which concept does the Production Possibilities Frontier (PPF) illustrate when showing the trade-off between producing two goods?
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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 production possibilities frontiers depicted in the diagram to the right illustrate which of the following concepts?
A
The marginal cost of producing one more unit of a good
B
The relationship between supply and demand for a single good
C
The equilibrium price and quantity in a competitive market
D
The maximum combinations of two goods that can be produced given available resources and technology
Verified step by step guidance1
Understand that a Production Possibilities Frontier (PPF) represents the maximum possible output combinations of two goods that an economy can produce given fixed resources and technology.
Recognize that points on the PPF curve show efficient production levels, where resources are fully utilized, while points inside the curve indicate inefficiency and points outside are unattainable with current resources.
Note that the PPF illustrates the trade-offs between producing one good versus another, highlighting opportunity costs involved in reallocating resources.
Identify that the PPF does not directly show supply and demand relationships, nor does it depict equilibrium price and quantity in a market.
Conclude that the PPF best illustrates the concept of the maximum combinations of two goods that can be produced given available resources and technology.
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