Understanding the Production Possibilities Curve
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Questions and Answers

Which of the following best describes the Production Possibilities Curve?

  • A graph that represents the relationship between production of two goods
  • A real-world representation of an economy's production possibilities
  • A model that shows alternative ways that an economy can use its scarce resources (correct)
  • A tool used by economists to make decisions

What does the Production Possibilities Curve graphically demonstrate?

  • Scarcity, trade-offs, opportunity costs, and efficiency (correct)
  • The decisions made by economists
  • The real-world production possibilities
  • The relationship between the production of two goods

What are the key assumptions of the Production Possibilities Curve?

  • Unlimited goods can be produced, partial employment of resources, flexible resources, changing technology
  • Limited goods can be produced, no employment of resources, flexible resources, changing technology
  • Multiple goods can be produced, no employment of resources, unlimited resources, no technology
  • Only two goods can be produced, full employment of resources, fixed resources, fixed technology (correct)

What does each point on the Production Possibilities Curve represent?

<p>A specific combination of goods that can be produced given full employment of resources (C)</p> Signup and view all the answers

What does the Production Possibilities Curve graphically represent?

<p>Resource allocation (A)</p> Signup and view all the answers

What does the Production Possibilities Curve assume about resources?

<p>They are fixed (A)</p> Signup and view all the answers

Is the Production Possibilities Curve a realistic representation of the economy?

<p>No, it is a simplified model (B)</p> Signup and view all the answers

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