How does the production possibilities frontier illustrate ...

[OSWALD]

How does the production possibilities frontier illustrate production efficiency?
 
  What will be an ideal response?

Question 2

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out, the new equilibrium level of GDP is likely to
 
  A) be at potential GDP.
  B) be below potential GDP.
  C) be above potential GDP.
  D) There is insufficient information given here to draw a conclusion.

[cassie_ragen]

Answer to Question 1

The combinations of outputs that lie on the PPF illustrate the concept of production efficiency. These points are the maximum production points possible and are attained only by producing the goods and services at the lowest possible cost. Any point inside the frontier reflects production where one or both outputs may be increased without decreasing the other output level. Clearly, such points cannot be production efficient.

Answer to Question 2

B

[OSWALD]

Gracias!

[LVPMS]

Thanks for the timely response, appreciate it