Question

If a point falls inside the production possibility curve, what does it indicate?

• A. Resources are overutilized.
• B. Resources are underutilized.
• C. There are no resources at all.
• D. All of the above.

Answer 1

Answer: (B)

Resources are underutilized.

Production possibility curve shows the different combinations of the production of two commodities that can be achieved if efficient production takes places in an economy given the resources and technology. So if an economy operates inside the PPF, then it indicates that the firm is not utilizing the supplied resources and technology efficiently.