Which of the following is false about optimized production technology (OPT) in the context of the Production Possibilities Frontier (PPF)?

• A. OPT is associated with productive efficiency, where it is impossible to produce more of one good without reducing the output of another.
• B. OPT always results in production occurring inside the PPF, indicating underutilization of resources.
• C. OPT helps firms achieve the lowest possible cost of production for a given output level.
• D. OPT ensures that resources are allocated in a way that maximizes output for a given set of inputs.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of Optimized Production Technology (OPT) in the context of the Production Possibilities Frontier (PPF). OPT refers to the most efficient way of producing goods using available resources and technology, which means producing on the PPF curve, not inside it.
2. Step 2: Recall that the PPF represents the maximum possible output combinations of two goods that an economy can achieve when all resources are fully and efficiently utilized. Points on the PPF indicate productive efficiency, while points inside the PPF indicate underutilization of resources.
3. Step 3: Analyze the statement that OPT always results in production occurring inside the PPF. Since OPT is about efficiency and maximizing output, production should occur on the PPF, not inside it. Therefore, this statement contradicts the definition of OPT.
4. Step 4: Review the other statements: OPT is associated with productive efficiency (true), helps firms achieve the lowest possible cost for a given output (true), and ensures resources are allocated to maximize output (true). These align with the concept of OPT.
5. Step 5: Conclude that the false statement is the one claiming OPT results in production inside the PPF, as this implies inefficiency and underutilization, which is the opposite of what OPT represents.