Any point inside the production possibilities curve indicates that
Multiple Choice
A technology must improve for the economy to produce more.
B resources are not currently being put to their best uses.
C government policy is restricting production.
D the economy needs more resources to increase production.
The correct answer and explanation is :
The correct answer is B: resources are not currently being put to their best uses.
Explanation:
The production possibilities curve (PPC) illustrates the maximum combinations of two goods or services that an economy can produce given its resources and technology. The curve reflects the concept of opportunity cost and the trade-offs an economy faces when allocating limited resources.
- Points on the curve represent efficient use of resources. At these points, the economy is producing the maximum possible output of both goods without wasting any resources.
- Points inside the curve, however, indicate inefficiency. If the economy is operating at a point inside the PPC, it is not using all of its available resources efficiently. In other words, some resources are underutilized, either due to unemployment, misallocation, or inefficiencies in production processes. For example, if there is high unemployment or underutilized capital, the economy is capable of producing more of one or both goods without sacrificing production of the other. This suggests that the economy is not fully exploiting its resources to achieve maximum production.
Let’s consider the options in more detail:
- A: A technology must improve for the economy to produce more. This is incorrect because a point inside the PPC doesn’t necessarily mean that technological improvement is needed. It just indicates inefficiency in resource use, not a technological constraint.
- C: Government policy is restricting production. This is also not correct. While government policies can sometimes restrict production (e.g., through regulations), the point inside the curve more likely reflects inefficiencies in the use of available resources rather than direct restrictions.
- D: The economy needs more resources to increase production. This is not true. A point inside the PPC suggests the economy is not using its existing resources fully, so it does not need more resources to increase production; it just needs to improve the allocation of its current resources.
Therefore, B is the correct choice because it directly addresses the issue of inefficiency in resource usage.