Consider the following statements regarding the Production Possibility Frontier (PPF): 1. It gives the combinations of goods that can be produced even when resources are largely unemployed. 2. If an economy wants to have more of one good, it must forgo some amount of the other good, assuming full employment of resources. Which of the statements given above is/are correct?

The correct option is 2 only. Explanation The Production Possibility Frontier (PPF) represents the maximum possible combinations of goods that an economy can produce using given resources and technology, under the assumption of full and efficient utilisation of resources. Statement-wise Analysis: - Statement 1 - Incorrect. The PPF is drawn under the assumption of full employment of resources; situations of unemployed or underutilised resources are represented by points inside the PPF, not on it. - Statement 2 - Correct. Under full employment, producing more of one good necessarily involves sacrificing some quantity of another good, reflecting the concept of opportunity cost. Key Takeaway: The PPF illustrates opportunity cost under conditions of full and efficient use of resources, not situations of unemployment.

NCERT Class 12 Economics — Chapter 1: Introduction

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Consider the following statements regarding the Production Possibility Frontier (PPF):

It gives the combinations of goods that can be produced even when resources are largely unemployed.
If an economy wants to have more of one good, it must forgo some amount of the other good, assuming full employment of resources.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

ABoth 1 and 2
B1 only
C2 only
DNeither 1 nor 2

Did you get this right?

Solution

The correct option is 2 only.

Explanation

The Production Possibility Frontier (PPF) represents the maximum possible combinations of goods that an economy can produce using given resources and technology, under the assumption of full and efficient utilisation of resources.

Statement-wise Analysis:

Statement 1 - Incorrect. The PPF is drawn under the assumption of full employment of resources; situations of unemployed or underutilised resources are represented by points inside the PPF, not on it.
Statement 2 - Correct. Under full employment, producing more of one good necessarily involves sacrificing some quantity of another good, reflecting the concept of opportunity cost.

Key Takeaway: The PPF illustrates opportunity cost under conditions of full and efficient use of resources, not situations of unemployment.

Your note

More from Chapter 1: Introduction

Consider the following statements regarding the "Mixed Economy": 1. It is an economy where both the government and the market play a role in economic activities. 2. It is an economy where all decisions are taken solely by the market. 3. India is cited as an example of a mixed economy. Which of the statements given above is/are correct?

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Consider the following statements regarding the fundamental nature of an economy: 1. Individuals in a society possess limited resources compared to their needs. 2. The scarcity of resources is a phenomenon faced by individuals but not by the society as a whole. 3. Compatibility between what people collectively want and what they produce is essential for an economy. Which of the statements given above is/are correct?

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With reference to the basic economic activities, consider the following statements: 1. Production, exchange, and consumption are considered the basic economic activities of life. 2. The problem of choice arises primarily because resources have single, specific usages. Which of the statements given above is/are correct?

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Consider the following statements regarding the "Central Problems of an Economy": 1. The problem of "What is produced" is unrelated to the quantity of goods to be produced. 2. The problem of "How are these goods produced" relates to the choice of technology to be adopted. 3. The problem of "For whom are these goods produced" involves determining the distribution of final goods among individuals. Which of the statements given above is/are correct?

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Consider the following statements regarding the allocation of resources: 1. In a market economy, allocation is determined solely by the central planning authority. 2. Allocation of resources refers to how much of which resource is devoted to the production of each good. 3. Allocation of resources has no impact on the combination of goods and services produced. Which of the statements given above is/are correct?

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