Question

Production Possibility Frontier is based on the following assumptions:

(i) The amount of resources in an economy is not fixed.
(ii) With the help of given resources, only two goods can be produced.
(iii) The level of technology is assumed to be constant.
(iv) Resources are equally efficient in the production of all products.

Alternatives:

Options

• (i), (ii) and (iv)

• (i), (iii) and (iv)

• (ii) and (iii)

• (ii), (iii) and (iv)

Answer 1

(ii) and (iii).

Explanation:

A PPF assumes that only two goods are produced and technology remains constant. Resources are fixed, not unfixed, and are not equally efficient in producing all goods; therefore, statements (i) and (iv) are incorrect.