Question

Read over the following statement and decide it if is true or false, the provide an argument supporting your answer. Your argument should be about three sentences long. (5 marks if this were on an exam). On the practice question site, you are to post your answer into the text box.

On the production possibility frontier, the amounts of the goods produced vary because the quantities of factors of production used vary.

Answer 1

The given statement is incorrect. This is because the production possibility frontier of an economy shows the maximum it can produce using its resources to its fullest. Now, in order to produce more of one commodity, some quantity of other commodity needs to be given up. This is because resources are limited with an economy. Now, quantities on PPF vary when we allocate the same factors of production available with the economy in different ways. The factors of production allocated to each commodity vary with every point of production possibility frontier. However, the total factors of production remain the same as they represent the limit on the resources owned by the economy.