Final answer:
The United States must have been producing inside the production possibilities frontier if it can increase its production of automobiles without decreasing the production of any other good. This position signifies the underutilization of economic resources, indicating that the economy is not operating at full efficiency.efficiency.The correct option is A.
Step-by-step explanation:
If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point inside the production possibilities frontier (PPF). The production possibilities frontier represents all the maximum possible combinations of two goods or services that can be produced within an economy when all resources are fully and efficiently utilized. If the economy is at a point inside the PPF, this indicates that the economy is not operating at full capacity and can increase the production of a good without sacrificing another, which is an underutilization of resources.
For example, in a simplified model, if the United States produces only oil, it can produce a maximum of 50 barrels with zero corn. If it produces only corn, it can produce a maximum of 100 bushels with no oil. Point C' on the PPF graph illustrates a combination of both oil and corn that is possible. If the United States is currently at a point inside its PPF, it means it could increase production of one or both goods without sacrificing the other, indicating room for increased efficiency or available resources that are not being fully utilized.