Question

Given below are two statements:
Statement (I): If resources are not fully and efficiently utilized, then the potential level of output will be less than the actual level of output.
Statement (II): The production possibility curve refers to the minimum possible level of output attainable with the available resources. In light of the above statements, choose the most appropriate answer from the options given below:

• A. Both Statement (I) and Statement (II) are correct.
• B. Both Statement (I) and Statement (II) are incorrect.
• C. Statement (I) is correct but Statement (II) is incorrect.
• D. Statement (I) is incorrect but Statement (II) is correct.

Hint:

PPC shows maximum output with efficient resource use; actual output falls below potential if resources are underutilized.

Answer 1

The Correct Option is B

Both statements are incorrect:
- Statement (I) is incorrect: If resources are not fully and efficiently utilized, the {actual level of output will be less than the {potential level of output, not the other way around. The potential output represents the maximum production possible with full and efficient resource use, while actual output is lower when resources are underutilized or inefficiently allocated.
- Statement (II) is incorrect: The production possibility curve (PPC) represents the {maximum possible output combinations of two goods or services attainable with given resources and technology, assuming full and efficient utilization. It does not depict the minimum possible output, as stated. Thus, option (2) is correct, as both statements are false.