Which of the following best describes the production concept in the context of the Production Possibilities Frontier (PPF)?

• A. The belief that all points inside the PPF represent maximum efficiency.
• B. The notion that opportunity cost does not exist when making production decisions.
• C. The principle that resources are limited, so producing more of one good requires producing less of another.
• D. The idea that an economy can produce any combination of goods without facing trade-offs.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the Production Possibilities Frontier (PPF) — it is a curve that shows the maximum possible output combinations of two goods that an economy can produce given fixed resources and technology.
2. Step 2: Recognize that the PPF illustrates the concept of scarcity and trade-offs, meaning that producing more of one good requires sacrificing some amount of another good due to limited resources.
3. Step 3: Identify that points on the PPF represent efficient production levels, while points inside the PPF indicate inefficiency, and points outside are unattainable with current resources.
4. Step 4: Understand that the production concept in this context emphasizes the principle of limited resources and opportunity cost, which is the cost of forgoing the next best alternative when making production decisions.
5. Step 5: Conclude that the correct description of the production concept is that resources are limited, so producing more of one good requires producing less of another, reflecting the trade-offs shown by the PPF.