Question

If an economy is operating at a point inside the production possibility 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 trick question because an economy cannot produce at a point inside the curve.

Answer 1

The correct option is A Its resources are being wasted.

Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given resources and technology which are to be fully utilized. So any point inside production possibility curve indicates that the resources are not fully utilized and are being wasted.