Question

Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

Answer 1

must decrease

If the output of military goods is increased, the output of civilian goods: must decrease

This is Production Possibilities Frontier

What is Production Possibilities Frontier ?

The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology.

• The shape of the PPF depends on whether there are increasing, decreasing, or constant costs.

• Points that lie on the PPF illustrate combinations of output that are productively efficient. We cannot determine which points are allocatively efficient without knowing preferences.

Learn more about Production Possibilities Frontier (PPF) here:

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