Question

Which of the following is NOT true of a nation’s production-possibility curve?

1)	The production-possibility curve shows all combinations of amounts of different products that an economy can produce when its resources are fully employed.

2)	Points inside the production-possibility curve are feasible, but may represent unemployment of some of the economy’s resources.

3)	Points outside the production-possibility curve are not feasible production points given the resources in the economy.

4)	The negative slope of the production-possibility curve indicates declining productivity.

Answer 1

ANSWER- The negative slope of the PPC indicates declining productivity

The negative of the PPC denotes diminishing marginal returns instead of declining productivity.

The negative slope is the result of diminishing marginal returns.

WHAT DOES DIMINISHING MARGINAL RETURNS MEANS?

PPC denotes the combination of the two commodities which the economy can produce with the given amount of resources.

Since the quantity of these resources is limited hence the production of one commodity needs to be sacrificed in order to increase the production of other commodity. this gives the negative slope to the ppc curve. Diminishing marginal returns means that to produce more units of good X some units of good Y need to be sacrificed because the amount of resources are limited.