c. separating resources into four categories: land, labor, capital d. allocating
ID: 1140777 • Letter: C
Question
c. separating resources into four categories: land, labor, capital d. allocating revenue among a firm's resource suppliers e. dividing an assembly process into separate steps 16. When drawing a production possibilities frontier, all of the following are except one. Which is the exception? a. The quantity of resources is rapidly growing b. Technology is fixed. c. Resources can be shifted between production of the two goods d. The production possibilities frontier is drawn for a particular time perioud e. Resources are fully and efficiently employed all of the following are usually assumed except one -17. Which of the following is most diagram? appropriately measured along one axis of the production possibilities frontier the quantity of a produced good b. a. the price of a produced good the quantity of natural resources d. c. the state of technology society's welfare and satisfaction e. 18. If all resources are used efficiently to produce goods and services, a nation will find itself producing a. b. c. d. e. inside its production possibilities frontier somewhere on its production possibilities frontier outside of its production possibilities frontier at one extreme end of its production possibilities frontier more of one product with no decrease in the production of any other product Exhibit 2-3 Good B GoodA 19. In Exhibit 2-3, if all the economy's resources are used efficienty to produce good A, then the economy is at b. e c. d. iExplanation / Answer
A production possibilities frontier is a curve which shows the combination of two goods which can be produced in an economy with the efficient utilisation of its resources.
16. The assumptions of production possibilities frontier are:
1) All the resources are used to produce only one or both of the two goods which can be shifted in their production,
2) The quantities of available resources do not change,
3) Fuller and efficient utilisation of resources,
4) The technology remains constant, and
5) The production possibilities frontier shows the production of goods for a particular period of time.
From the options given in the problem, option a. The quantity of resources is rapidly growing is not any of the assumptions of drawing a production possibilities frontier.
17. A production possibilities curve shows the quantity of the two goods produced within an economy using all the available resources. Hence, quantities of the produced goods are measured on the two axes of the diagram. Thus, option a. is the correct option. Options b., c., d. and e. are not represented by a production possibilities frontier.
18. If all available resources are used efficiently to produce the goods and services in a nation, it is known as fuller and efficient utilisation of resources. It is represented as one of the points on the production possibilities frontier.
Thus, option b. is the answer.
Option a. is incorrect as any point inside the production possibilities frontier shows less or inefficient utilisation of resources. Option c. is incorrect as any point outside a PPF shows overutilisation of resources. Option d. is incorrect because any point on one of the extremes of a PPF shows that out of the two, only one good is being produced in the economy. Option e. is incorrect because due to the limited availability of resources, in order to produce one good, some quantity of the other good has to be sacrificed. This concept is known as marginal opportunity cost.
19. From 18., it can be inferred that if an economy is utilising all its resources fully and efficiently to produce a good, then, its production point will lie on the production possibilities frontier. Thus, option a. is the answer.
Points g., b., c. and i. show that the economy is producing only one out of two goods. Point a. shows the origin (0,0), that is, none of the goods is produced and point f. lies inside the PPF, that is, lesser or inefficient utilisation of resources. Points d. and e. lie outside the PPF, which means over utilisation of available resources. Thus, options b., c., d. and e. are incorrect.
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