Consider an economy with fixed amount of resources and given technological state. It produces only 2 goods – Good A and Good B. Different combinations showing maximum outputs of two goods which can be produced (when given resources and technology are used fully) are plotted on a graph. When all the plotted points are joined, following graph was obtained.

Based on the above graph, answer the following questions.

What will be the above curve called as?

Production Possibility Curve

The correct answer is Option 2: Production Possibility Curve

A production possibility curve or Frontier is a graphical representation of the alternative combinations of goods and services an economy can produce considering the limited resources in the economy. In drawing the production possibility curve it is assumed that the economy can produce only two goods and that the quantities of factors of production and the technology available to the economy are fixed. All points on the curve show efficient utilization of resources.