Answer» Correct Answer - Option 3 : production possibility curve
The correct answer is the production possibility curve. - In macroeconomics, the transformation curve is defined as the maximum amount of one commodity X obtainable for any given amount of another commodity Y, and vice versa.
- This concept is basically the same as the production-possibility frontier studied in microeconomics. In this case, however, the transformation curve shows the trade-off (or opportunity cost) for a country when deciding to produce one commodity or good instead of some other.
- The production possibility frontier (PPF) is a curve that illustrates the variations in the amounts that can be produced of two products if both depend upon the same finite resource for their manufacture.
- PPF also plays a crucial role in economics. It can be used to demonstrate the point that any nation's economy reaches its greatest level of efficiency when it produces only what it is best qualified to produce and trades with other nations for the rest of what it needs.
- So the transformation curve can also be referred to as the production possibility frontier PPF or the production possibility curve.
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