Final answer:
A point inside the production possibilities curve indicates inefficient resource allocation as it suggests not all resources are being used to their fullest potential.
Step-by-step explanation:
A point that lies inside the production possibilities curve reflects an inefficient resource allocation. This is because the production possibilities frontier (PPF) represents all the possible combinations of goods and services that can be produced efficiently with the available resources and technology.
When an economy is operating on the frontier, it is producing the maximum possible output.
In contrast, if a point is inside the frontier, like point R mentioned in the reference, there are available resources that are not being utilized effectively, and the economy can increase the production of one or both goods without sacrificing the production of the other, indicating inefficiency.