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The production possibilities frontier and the budget constraint are analogous because both show:
AThe profit of the firm
BThe limit of what is attainable
CThe price of every good
DThe income of the household
Answer & Solution
Correct answer: B. The limit of what is attainable
1. One model applies to a society and the other to an individual.
2. The constraints society faces are explained using a model called the production possibilities frontier.
3. Each point on the budget constraint represents a combination whose total cost adds up to the budget.
4. In both cases the line marks the boundary between the attainable and the unattainable.
5. Neither model by itself reports prices, incomes or profits.
_Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 2 'Choice in a World of Scarcity', sections 2.1-2.3_
Related questions
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