A production possibilities curve (PPC) ?illustrates the attainable combination Blank______,
Multiple choice question.
of two goods that can be produced given a specific set of resources
of two goods that can be produced given a limited amount of income
of two goods that can be produced given an unlimited amount of resources
of many goods that can be produced given an unlimited amount of resources
The Correct Answer and Explanation is :
The correct answer is:
of two goods that can be produced given a specific set of resources
Explanation:
A Production Possibilities Curve (PPC), also known as the Production Possibilities Frontier (PPF), is a graphical representation that shows the maximum attainable combinations of two goods or services that an economy can produce, given a fixed amount of resources and technology.
Here’s how the PPC works:
- The two goods on the axis of the graph represent the trade-offs an economy faces when allocating its limited resources. For instance, one axis could represent the number of cars produced, and the other axis could represent the number of computers.
- The curve illustrates the opportunity cost of choosing one good over the other. If you increase the production of one good, you must decrease the production of the other good due to limited resources. The slope of the PPC reflects the opportunity cost.
- The specific set of resources refers to the factors of production (land, labor, capital, and entrepreneurship) available at a particular point in time. These resources are limited, which is why the economy cannot produce an unlimited amount of both goods simultaneously.
Why the other options are incorrect:
- Of two goods that can be produced given a limited amount of income: Income is not the key constraint for a PPC; rather, it is the limited resources in an economy. A PPC does not focus on income as the limiting factor but rather on the resources that can be allocated for production.
- Of two goods that can be produced given an unlimited amount of resources: The PPC is designed to show the trade-offs and opportunity costs when there are constraints in resources. An unlimited resource situation would mean there are no trade-offs, and the curve wouldn’t be needed.
- Of many goods that can be produced given an unlimited amount of resources: The PPC specifically illustrates trade-offs between two goods at a time, given limited resources. More than two goods and an unlimited resource scenario fall outside the scope of what a PPC demonstrates.
The PPC is essential in economic theory because it helps visualize the limitations of production, the need for choices, and the concept of opportunity cost.