Practicing Success
Which of the following is not an assumption of the production possibility frontier? |
Resources are fixed Stock of technological knowledge keeps increasing Resources are fully and effectively employed Stock of technological knowledge is given |
Stock of technological knowledge keeps increasing |
The correct answer is option (2) : Stock of technological knowledge keeps increasing The standard assumptions of the production possibility frontier include : 1. Resource are fixed : The PPF assumes a fixed quantity of resources in the economy. 2. Resources are fully and efficiently employed : The PPF assumes that resources are utilized to their maximum potential, and there is no waste or under utilization of resources. 3. Stock of technological knowledge is given : The level of technology is assumed to be constant in the traditional PPF model. This means that technological advancements are not considered in the basic PPF framework. Thus, the PPF assumes that resources are fixed, resources are fully and effectively employed, and the stock of technological knowledge is given. |