Question

An economy's PPF does all of the following except:

A) show the combination of outputs that should be produced.

B) illustrate scarcity by showing the points at which the economy cannot produce.

C) determine the various combinations of output that can be produced given that society's resources and technology.

D) exhibit opportunity cost by showing how much of one good must be sacrificed to secure more of another.

Answer 1

The Production Possibilities Frontier (PPF) shows various output combinations and exhibits opportunity cost, but does not dictate what should be produced; that requires a normative decision.

Step-by-step explanation:

The Production Possibilities Frontier (PPF) is a model that illustrates the tradeoffs and opportunity costs an economy faces when producing two or more goods. It can show the various combinations of output that can be produced (point C) and exhibit opportunity cost by demonstrating how much of one good must be given up to secure more of another (point D). However, the PPF does not show the combination of outputs that should be produced (point A). That involves a normative decision, which goes beyond the scope of the PPF's positive economic analysis. The curvature of the PPF can shift outward over time as an economy grows (point B), and when analyzing comparative advantage, countries can increase total production through specialization and trade.