Automobile production is an example of which type of economic process in the context of the Production Possibilities Frontier (PPF)?

• A. Productive efficiency
• B. Scarcity elimination
• C. Allocative inefficiency
• D. Opportunity cost maximization

Answer: (A)

Verified step by step guidance

1. Understand the concept of the Production Possibilities Frontier (PPF): it represents the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized.
2. Recall that 'productive efficiency' occurs when an economy produces goods using the least amount of resources, meaning it is operating on the PPF curve itself.
3. Recognize that 'scarcity elimination' is not possible because resources are limited, which is why the PPF exists in the first place.
4. Note that 'allocative inefficiency' means resources are not being used to produce the mix of goods most desired by society, which is different from productive efficiency.
5. Understand that 'opportunity cost maximization' is not a standard term; instead, opportunity cost is the trade-off represented by moving along the PPF, but maximizing it is not the goal.