Question

With a Production Possibilities curve of computers and coffee, if we can produce more computers and the same amount of coffee then currently, ___. A. we are producing outside the PPC B. We are producing inside the PPC C. If we increase computers we must produce less coffee D. If we increase coffee we must produce less computers E. We are producing on the PPC

Answer 1

If we can increase the production of computers without losing coffee output, we are currently inside the PPC. This happens due to inefficient resource use or improvements in resource allocation or technology. Transitioning to the PPC from within means optimizing resource allocation.

Step-by-step explanation:

In a Production Possibilities Curve (PPC), points within the curve indicate an inefficient utilization of resources. This fact allows us to conclude that we are producing inside the PPC (Option B), if we can produce more computers and maintain the current level of coffee production. This simply means that we can still increase production of one commodity without sacrificing the production of the other. If we're on the PPC, to increase the production of one commodity would require a decrease in the production of the other due to limited resources, a concept known as the law of diminishing returns. However, if we have the ability to increase productivity through technological advancements or the acquisition of more resources, the entire curve may shift outward, allowing for increased production without sacrificing another.

Learn more about Production Possibilities Curve (PPC)