2019 · Q60
Which one of the following statements is true with regard to an economy which is on its production possibility frontier?
indian-polity-economyeconomy-fundamentals
- AThe economy has to sacrifice some production of one commodity in order to increase the production of another commodity
- BThere is no limit or constraint for the economy in the production of goods and services
- CThe economy can produce more of one commodity up to a point without reducing the production of any other commodity
- DIts production possibility frontier is an upward sloping curve
Explanation
On the production possibility frontier all resources are fully employed, so producing more of one good requires sacrificing some of another - opportunity cost. The frontier slopes downward (not upward), and only inside the frontier can more of one good be produced without sacrifice. Hence A.