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:
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:
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:
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PPC shows maximum output with efficient resource use; actual output falls below potential if resources are underutilized.
Updated On: Jul 2, 2026
- Both Statement (I) and Statement (II) are correct.
- Both Statement (I) and Statement (II) are incorrect.
- Statement (I) is correct but Statement (II) is incorrect.
- Statement (I) is incorrect but Statement (II) is correct.
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The Correct Option is B
Approach Solution - 1
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.
- 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.
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Approach Solution -2
Reasoning from definitions:
Potential output is the maximum achievable with full and efficient use of resources; actual output is what is really produced given current utilization. If resources are used inefficiently or left idle, some of the potential is wasted, so actual output falls below potential output, not the reverse as Statement (I) claims, making it false. Turning to the production possibility curve (PPC), it is drawn by plotting every efficient combination of two goods obtainable from fully and efficiently employed resources, points on the curve represent maximum, not minimum, output combinations; points inside the curve represent underutilization instead. So describing the PPC as showing "minimum possible output" inverts its actual meaning, making Statement (II) false as well. With both statements misrepresenting the potential/actual and maximum/minimum relationships, option (2) is correct.
Potential output is the maximum achievable with full and efficient use of resources; actual output is what is really produced given current utilization. If resources are used inefficiently or left idle, some of the potential is wasted, so actual output falls below potential output, not the reverse as Statement (I) claims, making it false. Turning to the production possibility curve (PPC), it is drawn by plotting every efficient combination of two goods obtainable from fully and efficiently employed resources, points on the curve represent maximum, not minimum, output combinations; points inside the curve represent underutilization instead. So describing the PPC as showing "minimum possible output" inverts its actual meaning, making Statement (II) false as well. With both statements misrepresenting the potential/actual and maximum/minimum relationships, option (2) is correct.
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