What does a production possibilities frontier show? a. scarce and less scarce resources b. global trade-offs and costs of doing business c. an economy that is producing but not at the maximum d. the maximum amount that an economy can produce

The correct answer is D. A production possibilities frontier shows the maximum amount that an economy can produce.

The production possibility frontier is a marginalist model that reflects the maximum quantities of goods and services that a country or enterprise is capable of producing in a given period and based on certain production factors and technological knowledge. Therefore there are three situations in the productive structure of a country or enterprise:

-Inefficient productive structure: When it is below the PPF, that is, either all resources are not used (idle resources), or the technology is not adequate.

-Efficient productive structure: It is located in front of the border or very close to it. There are no idle resources and the best technology is being used.

-Unattainable productive structure: It is above the production possibilities. It is theoretical since no country or enterprise can produce beyond its capability.

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