Which of the following is an important message that a production possibility curve conveys about an economy?

It indicates the limited number of production possibility during a given period of time.

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It shows the maximum amount of any good that can be produced with the available resources.

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It shows the maximum expected demand in the near future.

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Both a and b.

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Solution

The correct option is D Both a and b.
Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced at the maximum in an economy at a given period of time with given the scarce resources and technology which are to be fully utilized.

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State any one assumption for the construction of the curve that shows the possibilities of potential production of two goods in an economy.

Name the situation reflected by an economy which produces a combination of goods that lie below its production possibility curve.

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