Question

Suppose the United States produces only two goods: wheat and computers. The following graph shows the United States’s current production possibilities frontier (also known as the production possibilities curve), along with six output combinations represented by black points (+ symbols) labeled A to F.

100 T PPF ー 60 0. 40 20 0 20 40 60 80 100 WHEAT (Millions of bushels)

Answer 1

A - Productive efficient, attainable

B - Productive efficient, attainable

C - Productive inefficient, attainable

D - Productive inefficient, attainable

E - Unattainable

F - Unattainable

Explanation: The points on the production possibility frontier (Point A and B) are both efficient and attainable as these are the maximum combinations which can be produced with the given resources. The points inside the production possibility frontier (Point C and D) are attainable but inefficient because the economy can produce more with the given resources. The points outside the production possibility frontier (Point E and F) are unattainable because the economy does not have enough resources to produce at these points.