Refer to Figure 2-2. At point A in the production possibilities graph shown above, the economy:

• A. is experiencing economic growth beyond its current PPF.
• B. is operating efficiently, using all available resources.
• C. is producing at a point unattainable with current resources.
• D. is operating inefficiently, with some resources underutilized.

Answer: (D)

Verified step by step guidance

1. Understand what a Production Possibilities Frontier (PPF) represents: it shows the maximum possible output combinations of two goods that an economy can produce using all available resources efficiently.
2. Identify point A on the graph relative to the PPF curve. If point A lies inside the PPF curve, it means the economy is not using all its resources efficiently.
3. Recall that points on the PPF curve represent efficient production, where all resources are fully utilized.
4. Recognize that points outside the PPF curve are unattainable with current resources, and points inside indicate inefficiency or underutilization of resources.
5. Conclude that since point A is inside the PPF, the economy is operating inefficiently, meaning some resources are underutilized.