Which of the following definition is correct answer of the production possibility set of the economy ?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The collection of all possible combinations of goods and services that can be produced from a given amount of resources and a given stock of technological knowledge
An economy has limited resources and a given level of technology. With these, it can produce many different combinations of goods, for example more corn and less cotton, or the reverse. The whole collection of combinations it can produce is called its production possibility set.
The boundary of this set, showing the largest amount of one good for each amount of the other, is the production possibility frontier.
NCERT (2026-27): Introductory Microeconomics — Chapter 1: Introduction
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