Question

If an economy is operating at a point inside the production possibilities curve:

• A. Its resources are being wasted
• B. The curve will begin to shift inward
• C. The curve will begin to shift outward
• D. This is a trick question because an economy cannot produce at a point inside the curve

Answer 1

Answer: (A)

Its resources are being wasted

Production possibility curve shows the different combinations of the production of two commodities that can be achieved in an economy given the resources and technology which are to be fully utilized. So if a firm is operating inside the production possibility curve, then it indicates that the firm is not utilizing the supplied resources and technology efficiently.