Consider the following statements:
(A) The production possibility frontier gives the maximum amount of corn that can be produced for any given amount of cotton.
(B) A combination strictly below the production possibility frontier cannot be produced with the economy’s resources.
(C) Opportunity cost is the amount of the other good that has to be forgone to have a little more of one good.
(D) The production possibility frontier shows the combinations produced when some resources are underemployed.
(E) Any point on the production possibility frontier can be produced with the economy’s resources.
Which of the above statements are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (C) and (E) only
The frontier shows what an economy can produce when its resources are fully used.
(A) The production possibility frontier gives the maximum amount of corn that can be produced for any given amount of cotton. — Correct. The frontier marks the most of one good for each amount of the other.
(B) A combination strictly below the production possibility frontier cannot be produced with the economy’s resources. — Incorrect. Any point on or below the frontier can be produced. A point below is produced when some resources are idle or wasted.
(C) Opportunity cost is the amount of the other good that has to be forgone to have a little more of one good. — Correct. This is the meaning of opportunity cost.
(D) The production possibility frontier shows the combinations produced when some resources are underemployed. — Incorrect. The frontier shows combinations produced when resources are fully utilised. Underemployment puts the economy below it.
(E) Any point on the production possibility frontier can be produced with the economy’s resources. — Correct. Any point on or below the frontier can be produced.
NCERT (2026-27): “Production Possibility Frontier … If all the resources are used in the production of corn, the maximum amount of corn that can be produced is 4 units and if all resources are used in the production of cotton, at the most, 10 units of cotton can be produced. … 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.” “The production possibility frontier gives the combinations of corn and cotton that can be produced when the resources of the economy are fully utilised. Note that a point lying strictly below the production possibility frontier represents a combination of corn and cotton that will be produced when all or some of the resources are either underemployed or are utilised in a wasteful fashion.” “… Thus, there is always a cost of having a little more of one good in terms of the amount of the other good that has to be forgone. This is known as the opportunity cost of an additional unit of the goods.” |