19 The production possibilities frontier is a graph that sho

19. The production possibilities frontier is a graph that shows the various combinations of output that an economy (a) should produce (b) wants to produce. (c) can produce (d) demands 20. It is possible for an economy to increase its production of both goods if the economy (a) moves downward and to the right along its production possibilities frontier and (b) moves upward and to the left along its production possibilities frontier and the (c) moves in either direction along its production possibilities frontier and the frontier (d) moves from a situation of inefficient production to a situation of efficient produc- the frontier is bowed outward. frontier is bowed outward is a straight line. tion.

Solution

19. C. PPF is a graph showing the various combinations of output that an economy can produce with the inputs or resources ( capital, human, natural) that are available.

20.D. If resources are used effiiciently, the country will produce on the PPF, otherwise, the production will be below the PPF. Moving from inside the PPF to a point on the PPF would mean increase in production.

21. D. The PPF is bowed because of the increasing opportunity cost of producing additional unit of a good. Increasing production of one good would mean giving up another good as resources are scarce. So the opportunity cost of increasing additional unit of one good is increasing.

22. C. The law of demand states that if the price of a good is decreased than the quantity demanded increases.