Question

Suppose residents of Montana operate on their production possibility frontier, and they want to increase production of both wheat and fly-fishing rods. According to the production possibility frontier, this cannot happen without new resources or technological improvement.

A. True
B. False

Answer 1

TRUE

Step-by-step explanation:

Production Possibility Curve is the graphical locus of product combinations that an economy can produce given resources & technology.

Goods are inversely related (one increase, other decrease & vice versa); because of given resources & technology. So, PPC is downward sloping.

PPC is based on a fundamental assumption that resources are fully efficiently utilised. So, all products combination points on the PPC denote best potential production of the economy. Any product combination beyond PPC are unattainable points, outside economy's potential - given resources & technology (unless either of them change)

Hence: Montana operating on PPC is producing at full potential given resources & technology. It can increase both goods (wheat and fly-fishing rods) only if there is improvement in resources / technology.