Match each economic scenario with the correct economic term.
A A country can produce more units of good B without reducing the units of good A it produces.
B A country cannot produce more units of good A without producing fewer units of good B.
C A country wants to produce 10 units of good A and 12 units of good B but can produce only 5 units of D good A and 4 units of good B.
E efficiency
F underutilization
G unattainability
The correct answer and explanation is :
Here’s the correct matching of the economic scenarios with their respective terms:
- A: Efficiency
Explanation: When a country can produce more units of good B without reducing the units of good A, it indicates that the country is operating efficiently. This reflects a scenario where resources are being utilized in the most productive way, and the country is not facing any trade-offs. The production is on the production possibilities frontier (PPF), which represents the maximum possible output combinations of two goods given the country’s resources and technology. This situation represents an efficient allocation of resources, where both goods are being produced at their maximum potential without sacrifice. - B: Underutilization
Explanation: When a country cannot produce more units of good A without producing fewer units of good B, it implies the country is at a point where resources are being fully utilized, but the production capacity could still be expanded in terms of one good at the expense of the other. However, it’s not optimal in the sense that the country could be producing more efficiently, often shown as being inside the production possibilities curve. This represents underutilization of resources, where a country could increase the production of one good without sacrificing the production of another if they were fully optimized. - C: Unattainability
Explanation: The scenario where a country wants to produce 10 units of good A and 12 units of good B but can only produce 5 units of good A and 4 units of good B represents a situation of unattainability. This is outside the production possibilities frontier, meaning that the desired combination of goods is not achievable with the current resources and technology. The country does not have enough resources to produce that combination of goods, indicating that the target is unattainable.
Additional Concepts:
- Efficiency refers to the optimal use of resources where maximum output is produced with the available inputs.
- Underutilization occurs when resources are not being fully used, meaning the country could increase the production of some goods without reducing others.
- Unattainability refers to situations where a desired combination of goods exceeds what is possible given current resources and technology, lying outside the production possibilities frontier.