Consider the following statements regarding the "Production Possibility Set": 1. It represents only those combinations of goods that are impossible to produce with given resources. 2. It assumes that the stock of technological knowledge is given and constant. Which of the statements given above is/are correct?

Correct Option The correct option is 2 only. Explanation The Production Possibility Set refers to the collection of all possible combinations of goods and services that an economy can produce with its available resources and given level of technology. It encompasses both the points on the Production Possibility Frontier (PPF) and the area inside it. Statement-wise Analysis - Statement 1 is Incorrect. The Production Possibility Set represents the combinations of goods that are feasible or possible to produce given the resource constraints. It includes efficient combinations (on the frontier) and inefficient combinations (inside the frontier). Combinations that are impossible to produce lie outside the production possibility set. - Statement 2 is Correct. The concept relies on specific assumptions to isolate the relationship between the production of different goods. It assumes that the total resources available to the economy are fixed and that the stock of technological knowledge is given and constant. If technology improves, the production possibility set would expand. Key Takeaway The Production Possibility Set includes all attainable combinations of output (both efficient and inefficient). It is defined by the scarcity of factors of production and a fixed state of technology.

NCERT Class 12 Economics — Chapter 1: Introduction

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Consider the following statements regarding the "Production Possibility Set":

It represents only those combinations of goods that are impossible to produce with given resources.
It assumes that the stock of technological knowledge is given and constant.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 only
BNeither 1 nor 2
CBoth 1 and 2
D2 only

Did you get this right?

Solution

Correct Option

The correct option is 2 only.

Explanation

The Production Possibility Set refers to the collection of all possible combinations of goods and services that an economy can produce with its available resources and given level of technology. It encompasses both the points on the Production Possibility Frontier (PPF) and the area inside it.

Statement-wise Analysis

Statement 1 is Incorrect. The Production Possibility Set represents the combinations of goods that are feasible or possible to produce given the resource constraints. It includes efficient combinations (on the frontier) and inefficient combinations (inside the frontier). Combinations that are impossible to produce lie outside the production possibility set.
Statement 2 is Correct. The concept relies on specific assumptions to isolate the relationship between the production of different goods. It assumes that the total resources available to the economy are fixed and that the stock of technological knowledge is given and constant. If technology improves, the production possibility set would expand.

Key Takeaway

The Production Possibility Set includes all attainable combinations of output (both efficient and inefficient). It is defined by the scarcity of factors of production and a fixed state of technology.

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?

easy

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?

easy

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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Correct Option

The correct option is 2 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. The Production Possibility Set represents the combinations of goods that are feasible or possible to produce given the resource constraints. It includes efficient combinations (on the frontier) and inefficient combinations (inside the frontier). Combinations that are impossible to produce lie outside the production possibility set.
Statement 2 is Correct. The concept relies on specific assumptions to isolate the relationship between the production of different goods. It assumes that the total resources available to the economy are fixed and that the stock of technological knowledge is given and constant. If technology improves, the production possibility set would expand.