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Consider Consumer and Capital Goods. If the economy is operating at point Y and its relevant...

Consider Consumer and Capital Goods. If the economy is operating at point Y and its relevant production possibility frontier is on the production possibility curve, this means that:

A. the economy is at full employment and is efficient.
B. the economy is less than fully employed.
C. the economy is not efficient.
D. economic growth is not possible in the future.
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Answer #1

Capital goods are a product that is used to produce consumer goods in the future but not for immediate, final consumption such as machinery. Consumer goods are goods for final consumption, usually by individual households. product possibility Curve (PPC) is a curve showing the various combinations of the maximum quantity of two outputs.

Here in the given figure at point Y, the economy decides to invest largely in capital goods which will lead to more advanced and higher quality consumer goods produced in the long run, but in the short run, there will be little production of consumer goods which would make the economy unable to supply for the current needs and wants efficiently which means economy is not efficient.

The answer is C [ The Economy is not efficient]

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