Question

When an economy is operating on the PPC, it indicates

• A. potential output > actual output
• B. potential output = actual output
• C. potential output < actual output
• D. none of these

Answer 1

The correct option is B

potential output = actual output

Since PPC shows different combinations of two goods that can be produced when the given resources are fully and efficiently utilized and the technology for producing them remains constant, therefore, an economy operating on PPC will always indicate that potential output is equal to the actual output.