Which of the following occurs only in the long run with respect to the Production Possibilities Frontier (PPF)?

• A. Resources are used inefficiently and production is inside the PPF.
• B. Firms can adjust all inputs, including capital and labor.
• C. Firms can only adjust labor while capital remains fixed.
• D. The opportunity cost of production becomes zero.

Answer: (B)

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 that an economy can produce given fixed resources and technology.
2. Recall the difference between the short run and the long run in microeconomics: in the short run, at least one input (usually capital) is fixed, while in the long run, all inputs (including capital and labor) can be varied.
3. Analyze each option in the context of short run vs. long run: - "Resources are used inefficiently and production is inside the PPF" can happen anytime, not only in the long run. - "Firms can only adjust labor while capital remains fixed" describes the short run scenario. - "The opportunity cost of production becomes zero" is incorrect because opportunity cost is always positive when resources are scarce.
4. Identify that the statement "Firms can adjust all inputs, including capital and labor" specifically describes the long run, when firms have the flexibility to change all factors of production.
5. Conclude that the unique characteristic of the long run with respect to the PPF is the ability of firms to adjust all inputs, which allows the economy to move along or expand the PPF.