Question

Suppose in the country of Wetland there are production inefficiencies. This: A. can both be illustrated by some point outside the production possibilities curve. B. can exist at some point on a production possibilities curve. C. causes the production possibilities curve to shift outward. D. can both be illustrated by some point on the inside the production possibilities curve. E. All of the other answers are incorrect.

Answer 1

Ans) PPC is a graphical representation of possible combination of two goods that a country can produce given its limited resources and technology.

Any point on PPC shows possible and efficient outcome. That is, one cannot produce more of one good without decreasing the production of another good.

Any point inside the PPC shows possible but inefficient outcome. That is, more of goods can be produced at zero opportunity cost i.e without sacrificing the production of another good. Inefficiency arises when there is underemployment or underutilisation of resources.

Any point outside PPC shows unattainable outcome.

Option d (a point inside PPC)