Which of these statement is true about production possibility curve (PPC/PPF)?

It shows various combinations of two goods which yield same level of satisfaction

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It shows various combination of two goods which, an economy can produce with a given amount resources

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It shows various combination of two goods which an economy can produce with a given budget

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It shows various combination of tivo goods which an economy can produce with a given time

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Solution

The correct option is D It shows various combination of two goods which, an economy can produce with a given amount resources
Production Possibility Frontier (PPF) or Production Possibility Curve (PPC) depicts various production possibilities that represent the maximum possible combination of two goods that can be produced given the resources and technology.

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

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