Which statement best describes an economy operating inside the PPC curve?

Which statement best describes an economy operating inside the PPC curve?

• A. Producing at maximum output
• B. Producing below maximum output
• C. Producing above maximum output
• D. Producing exactly at maximum

Answer: (B)

The PPC shows the combinations of two goods that can be produced with available resources and technology. Points inside the curve mean resources aren’t being used to their full potential, so the economy is producing below what it could. That’s why producing below maximum output is the correct description. Producing at maximum output would be on the curve, not inside; producing above maximum would require more resources or better technology; and producing exactly at maximum would also lie on the curve.

The PPC shows the combinations of two goods that can be produced with available resources and technology. Points inside the curve mean resources aren’t being used to their full potential, so the economy is producing below what it could. That’s why producing below maximum output is the correct description. Producing at maximum output would be on the curve, not inside; producing above maximum would require more resources or better technology; and producing exactly at maximum would also lie on the curve.