Question

Q. Which one of the following statements is true with regard to an economy that is on its production possibility frontier?

• A. The economy can produce more of one commodity up to a point without reducing the production of any other commodity.
• B. There is no limit or constraint for the economy in the production of goods and services.
• C. The economy has to sacrifice some production of one commodity in order to increase the production of another commodity.
• D. Its production possibility frontier is an upward sloping curve.

Answer 1

The correct option is C The economy has to sacrifice some production of one commodity in order to increase the production of another commodity.

Explanation:

• Production possibility frontier is the graph that indicates the various production possibilities of two commodities when resources are fixed.
• The production of one commodity can only be increased by sacrificing the production of the other commodity.