B 098765 Industrial robots (thousands) 43 2 C W D Attainable Multiple Select Question Select all that apply. Unattainable Which of the following scenarios are illustrated in the given production possibilities curve? Output combination C is better than the output combination B An economy in full employment along the curve Attainable combinations of both goods below the curve Unemployment at point W
The Correct Answer and Explanation is:
The correct answers are:
- An economy in full employment along the curve
- Attainable combinations of both goods below the curve
- Unemployment at point W
Explanation
This graph shows a Production Possibilities Curve (PPC), which illustrates the trade-offs an economy faces when producing two different goods, in this case, industrial robots and an unnamed good on the x-axis.
An economy in full employment along the curve: The curve itself, often called the production possibilities frontier, represents the maximum potential output of an economy when all its resources (like labor and capital) are fully and efficiently employed. Points A, B, C, and D are all on this curve, indicating that at any of these production combinations, the economy is operating at its peak efficiency with full employment.
Attainable combinations of both goods below the curve: Any point inside or below the PPC, such as the entire shaded region labeled “Attainable,” represents a combination of goods that the economy can produce. However, these points are inefficient because the economy is not using all its resources to their fullest potential. This means more of one or both goods could be produced with the available resources.
Unemployment at point W: Point W lies inside the PPC. As explained above, points inside the curve signify inefficiency. A primary cause of this type of economic inefficiency is the underutilization of resources. Unemployment, where a portion of the labor force is not working, is a classic example of underutilized resources. Therefore, an economy producing at point W is experiencing unemployment and is not reaching its productive potential.
The statement “Output combination C is better than the output combination B” is incorrect. Both points B and C are on the PPC, meaning they are both efficient and represent full employment. The choice between B and C is a matter of societal preference, not a matter of one being technically better. Point B prioritizes producing more industrial robots, while point C prioritizes more of the other good.
