Question

An economy produces goods and services in a manner such that it always operates on the PPC.

• A. True
• B. False

Answer 1

The correct option is B False

Production possibility curve shows all the different attainable combinations of the production of two commodities that can be produced in an economy with the given resources and technology which are to be fully utilized.
Therefore, in order to utilize all the resources efficiently an economy must operate on PPC because all the points on PPC indicates production in which resources and technology are fully utilized. However, an economy may underutilise resources, whereby the economy will operate on a point inside the PPC.