2 The circular-flow diagram illustrates that, in markets for the factors of production, a households are sellers, and firms are buyers.

b households are buyers, and firms are sellers.

c households and firms are both buyers.

d households and firms are both sellers.

b Graph the production possibilities frontier for this economy. Using your answers to part (a), identify points A, B, C and D on your graph.
c Explain why the production possibilities frontier has the shape it does.
d Are any of the allocations calculated in part

(a) inefficient? Explain.