The table shows some combinations of corn and cotton that an economy can produce when its resources are fully utilised:
| Possibility | A | B | C | D | E |
|---|---|---|---|---|---|
| Corn (units) | 0 | 1 | 2 | 3 | 4 |
| Cotton (units) | 10 | 9 | 7 | 4 | 0 |
The economy actually produces 2 units of corn and 5 units of cotton. What does this show?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → All or some of its resources are underemployed or used in a wasteful way.
With 2 units of corn, the economy can produce at most 7 units of cotton (possibility C). It produces only 5 units, less than it could. So it is at a point strictly below the frontier, where some resources are underemployed or wasted.
Option (1) Its stock of technological knowledge has improved. — Incorrect. Better technology would let it produce more than C. Here it produces less.
Option (2) All its resources are fully utilised. — Incorrect. Full use would give 7 units of cotton with 2 units of corn.
Option (3) This combination cannot be produced with its present resources. — Incorrect. The economy can produce up to 2 corn and 7 cotton, so 2 corn and 5 cotton is within its reach.
Option (4) All or some of its resources are underemployed or used in a wasteful way. — Correct. Output is below the most it can make, so resources are not fully used.
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. The economy can also produce 1 unit of corn and 9 units of cotton or 2 units of corn and 7 units of cotton or 3 units of corn and 4 units of cotton. There can be many other possibilities. …” “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.” |