What do combinations of output that fall inside the production possibilities frontier (PPF) represent?

• A. Maximum possible output
• B. Productive inefficiency
• C. Unattainable combinations with current resources
• D. Productive efficiency

Answer: (B)

Verified step by step guidance

1. Understand that the Production Possibilities Frontier (PPF) represents the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
2. Recognize that points on the PPF curve indicate productive efficiency, meaning resources are fully and efficiently utilized.
3. Identify that points outside the PPF are unattainable with current resources, as they require more inputs than available.
4. Focus on points inside the PPF curve, which represent output combinations where some resources are underutilized or wasted.
5. Conclude that combinations inside the PPF indicate productive inefficiency because the economy is not maximizing its production potential.