Question:
Which of the following is always true of an economy operating on its production possibilities frontier?
(1) It must be a free market economy.
(2) It must be a command economy.
(3) Its resources are fully employed.
(4) It has achieved production efficiency but impossible to achieve allocative efficiency.
(5) It must have a linear production possibilities frontier.
Correct Answer:
(3)
Answer Explanation:
Operating exactly on the Production Possibilities Frontier (PPF) means the economy has achieved productive efficiency. This occurs only when all available resources are fully and efficiently employed.
Topic: PPC Year: 2018
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