The _____ illustrates the trade-offs facing an economy that produces only two goods.

A) production possibility frontier
B) circular-flow diagram
C) all else equal assumption
D) income distribution

Question

The _____ illustrates the trade-offs facing an economy that produces only two goods.A) production possibility frontierB) circular-flow diagramC) all else equal assumptionD) income distribution

Zachary Thistle · Accepted Answer

Final Answer : A, Explanation :  The production possibility frontier (PPF) is a graphical representation of the maximum combinations of two goods that an economy can produce, given its resources and technology. It illustrates the trade-offs and opportunity costs of producing one good over another. Therefore, it is the best choice as it directly addresses the concept of trade-offs in a two-good economy.

The _____ illustrates the trade-offs facing an economy that produces only two goods.

A) production possibility frontier
B) circular-flow diagram
C) all else equal assumption
D) income distribution

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