Question

Consider the following table:

Production Possibilities	A	B	C	D	E
Guns (Units)	0	1	2	3	4
Butter (Units)	10	9	7	4	0

If at some other point say G, the economy produces 2 units of guns and 6 units of butter, then ______.

Options

• It represent under-utilisation of resources

• Economy would operate at a point below PPF

• Both (a) and (b)

• Neither (a) nor (b)

Answer 1

If at some other point say G, the economy produces 2 units of guns and 6 units of butter, then it represent under-utilisation of resources and economy would operate at a point below PPF.

Explanation:

At 2 units of guns, the maximum butter that can be produced is 7 units. Producing only 6 units of butter means operating inside the PPF, which represents underutilisation of resources and a point below the PPF.