Consider the following statements:
(A) The points on the production possibility frontier are a part of the production possibility set.
(B) Combinations strictly below the production possibility frontier are not a part of the production possibility set.
(C) A combination strictly below the production possibility frontier can be produced with the economy’s resources.
(D) The production possibility set is defined for a given amount of resources and a given stock of technological knowledge.
(E) The production possibility frontier gives the minimum amount of one good that can be produced for any given amount of the other good.
Which of the above statements are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (C) and (D) only
The production possibility set holds every combination that can be produced with the given resources and technology. Points on the frontier and below it can all be produced.
(A) The points on the production possibility frontier are a part of the production possibility set. — Correct. Points on the frontier can be produced, so they are in the set.
(B) Combinations strictly below the production possibility frontier are not a part of the production possibility set. — Incorrect. Points below the frontier can also be produced, so they too belong to the set.
(C) A combination strictly below the production possibility frontier can be produced with the economy’s resources. — Correct. It is produced when some resources are underemployed or wasted.
(D) The production possibility set is defined for a given amount of resources and a given stock of technological knowledge. — Correct. This is how the set is defined.
(E) The production possibility frontier gives the minimum amount of one good that can be produced for any given amount of the other good. — Incorrect. The frontier gives the maximum amount, not the minimum.
NCERT (2026-27): “Production Possibility Frontier … Given the total amount of resources, it is possible to allocate the resources in many different ways and, thereby achieving different mixes of all possible goods and services. The collection of all possible combinations of the goods and services that can be produced from a given amount of resources and a given stock of technological knowledge is called the production possibility set of the economy.” “… The figure illustrates the production possibilities of the economy. Any point on or below the curve represents a combination of corn and cotton that can be produced with the economy’s resources. The curve gives the maximum amount of corn that can be produced in the economy for any given amount of cotton and vice-versa. This curve is called the production possibility frontier.” |