Question

1. If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true? (    )

1. Effective trade barriers have reduced foreign imports into the economy.
2. New technology is being used in production.
3. Resources are not available to achieve that combination of goods or services.
4. Resources are not being used efficiently to achieve that combination of goods or services.
5. Resources are being used at a more rapid rate than they were in the past.

3. The concept of opportunity cost would no longer be relevant if （        ）

1. poverty in an economy no longer existed
2. the supply of all resources were unlimited
3. resources were allocated efficiently
4. real wages were flexible
5. all current incomes were invested in technological research

Answer 1

The correct option is C) Resources are not available to achieve that combination of goods or services.

Point lying outside the production possibility frontier represent that resources are not available to achieve that combination.

Opportunity cost is the loss of other alternatives when one alternative is chosen. Opportunity cost is relevant in case of scarcity of resources.

It would become irrelevant if B) the supply of all resources were unlimited.