Question
In an economy, unemployment exists only at points that are on the interior of the production possibilities frontier. True False
Ask by Greene Estrada. in the United States
Mar 21,2025
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Answer
Unemployment exists at points inside the production possibilities frontier.
Solution
The statement is **True**.
In an economy, the production possibilities frontier (PPF) represents the maximum output combinations of two goods that can be produced with available resources and technology. Points on the PPF indicate efficient use of resources, while points inside the PPF indicate inefficiency, which can be associated with unemployment. Therefore, unemployment exists at points that are on the interior of the production possibilities frontier.
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True! Unemployment occurs when not all resources, including labor, are being utilized efficiently. In the context of a production possibilities frontier (PPF), which shows the maximum output combinations of two goods with given resources, points on the interior represent underutilization of resources—hence, the presence of unemployment. In practical terms, this means that an economy can produce more goods and services if it fully employs its available labor and resources. Recognizing this inefficiency can lead to policy interventions aimed at reducing unemployment and optimizing resource use!
