In the economy, 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 is called?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Production Possibility Set.
An economy has only so much land, labour, capital and know-how. With a given amount of resources and a given stock of technological knowledge it can make more of one good only by making less of another, and each way of sharing out the resources gives a different combination of goods and services. All these possible combinations taken together form the production possibility set of the economy.
Its outer edge, the production possibility frontier, shows the largest amount of one good that can be produced for each amount of the other.
Why the other options are incorrect
Option (1) Production Possibilities. — Incorrect. The combinations one by one are the economy’s production possibilities, but the collection of all of them is called the production possibility set, which is the term the question defines.
Option (2) Production Function. — Incorrect. A production function is the relationship between the inputs a firm uses and the maximum output it can produce from them, so it describes one firm’s technology, not the whole economy’s choice among goods.
Option (4) Isoquant. — Incorrect. An isoquant shows the combinations of two inputs that give one firm the same level of output, so it belongs to a single firm’s production function, not to the whole economy’s output of goods.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 13-05 S1* 24-05 S1 | 13-05 S1* 30-05 S2* | – | – | – |
* A similar question.
NCERT (2025-26): “1.2 Central Problems of an Economy … The scarce resources have alternative usages and every society has to decide on how much of each of the resources to use in the production of different goods and services. In other words, every society has to determine how to allocate its scarce resources to different goods and services. An allocation of the scarce resource of the economy gives rise to a particular combination of different goods and services. 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.” |