Question:
Which of the following is assumed in constructing a production possibilities curve?
(1) The economy is using its resources inefficiently.
(2) Resources are utilized to produce only private goods.
(3) Full employment, but not full production, is being realized.
(4) Production technology is fixed.
(5) There is no inflation in the economy.
Correct Answer:
(4)
Answer Explanation:
A Production Possibilities Curve (PPC) is a static model built on specific assumptions: the economy produces only two goods, the quantity and quality of resources are fixed, all resources are fully and efficiently employed, and the state of technology is fixed (constant).
Topic: PPC Year: 2017
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