Question

According to one of the practice problems, how do you define an inefficient (D), efficient (E) , unattainable (F) point on a PPF? A. The point lies inside the PPF, indicating unused resources (inefficient).

B. The point lies on the PPF, representing the optimal use of resources (efficient).
C. The point lies outside the PPF, denoting a combination of goods beyond current production capacity (unattainable).
D. The point lies inside the PPF, suggesting a combination of goods that could be improved for better resource utilization (inefficient).

Answer 1

On a PPF, an inefficient point (D) lies inside the curve, an efficient point (E) is on the curve, indicating optimal resource utilization, and an unattainable point (F) is located outside the curve, representing a production combination that cannot be currently achieved.

Step-by-step explanation:

To define points on a Production Possibilities Frontier (PPF), we classify them based on their location relative to the PPF curve.

• Inefficient point (D): This point lies inside the PPF, which indicates that resources are not being used to their full potential. An economy can produce more of one good, the other good, or some combination of both goods.
• Efficient point (E): This point is on the PPF curve itself, representing the most efficient use of resources. At this point, it is impossible to produce more of one good without decreasing the quantity of another good.
• Unattainable point (F): This lies outside the PPF and represents a level of production that is not currently achievable given the available inputs and technology.

Points inside the frontier, such as D, are productively inefficient because the economy could produce more of one or both goods. Points on the frontier, like points B, C, and D in Figure 2.4, exhibit productive efficiency. Conversely, point R outside the PPF is unattainable with current resources and technology.