Question

where would a country want to be on the production possibility curve? inside, outside, or on the curve? why? How does a country make that decision? be specific with your answer.

Answer 1

Answer : A country want to be on the production possibility curve because this curve depicts best possible combination of different output with available resources. The reason for choosing point on the curve because

• Available resources are efficient allocated.
• The point on or inside the frontier are attainable.
• Output should be maximised.

A country make decision on the curve because here the resources should be properly utilised and output should be maximum and it is at attainable level.So the country should always choose the point on the curve as resources are fully utilised and maximum output has been attained and welfare of the country.