Which of the following is NOT illustrated by the production possibility curve?

A. Risk
B. Scarcity
C. Opportunity cost
D. Allocative efficiency

Correct Answer:

Option A – Risk

Explanation

Production possibilities curve demonstrates that:
• There is a limit to what the society/individual can achieve, given the existing institutions, technology and resources.
• Every choice the society/individual makes has an opportunity cost – to get more of one good, we need to give up some of another good – every choice has a tradeoff.

PPF also illustrates the concept of efficiency. The combination of goods depicted on the curve are attainable only if all the resources are fully employed, with the most efficient means of production possible. All of the points on the frontier are said to be productively efficient, because they are fully utilizing the economic resources that they have