Question

Does production possibility frontier indicate the actual level of output or potential level of output?

Answer 1

Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology which are to be fully utilized. Therefore, all the points on the production possibility curve indicates the point where the resources are fully utilized i.e potential output and even if the resources are not fully utilized then it indicates the real output which is produced.