Fig. 1 shows the production possibility curve for a coastal economy producing fishing boats and tonnes of processed fish. Point A is inside the curve. AFish...
Question 1 Report
Fig. 1 shows the production possibility curve for a coastal economy producing fishing boats and tonnes of processed fish. Point A is inside the curve.
What does point A show about the use of resources in this economy? [1]
Explain one possible reason why production is at point A. [2]
Answer Details
(a) Point A shows that resources are unemployed or underused, so production is inefficient. [1]
A point inside a production possibility curve means the economy could produce more of at least one good without reducing production of the other. It is therefore below its maximum possible output.
(b) One possible reason is unemployment. [2]
If workers are unemployed, and capital such as machinery is not fully used, the economy cannot produce its potential output of fishing boats and processed fish. This places production inside the curve at A.
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