Which of the following statements about the production possibilities frontier is true?
I. If the PPF is bowed outward (from the origin), producing more of one product results in greater and greater opportunity costs in the output of the second product.
II. If the economy is operating at full and efficient employment, the output combinations will be on the PPF.
III. Unattainable combinations of goods are shown by points inside the PPF.
IV. Economic growth may be illustrated by shifting the PPF outward, away from the origin.
Only statement II is true.
Only statement III is true.
All statements are true.
Only I and III are true.
Only II, III, and IV are true.
Statements I, II, and IV are true.
Only statement IV is true.
Answer:
Statement I is true.
Statement II is true*.
Statement III is false.
Statement IV is true.
So your answer is "Statements I, II, and IV are true."
*: I would argue that this one is false. Modern PPF curves are drawn factoring in the natural rate of unemployment, not full employment. Also, utilization of other, non-labor resources must be optimized for production to be on the PPF. HOWEVER, Statements I and IV are most definitely true, and statement III is definitely false, so the response "Statements I, II, and IV are true" is, by process of elimination, the best answer.
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