According to the production possibilities frontier (PPF), why does point P demonstrate productive efficiency?

• A. Point P is at the origin, meaning no goods are being produced.
• B. Point P is outside the PPF, representing an unattainable level of production.
• C. Point P lies on the PPF, indicating that resources are being used in the most efficient way possible.
• D. Point P is inside the PPF, showing that some resources are unused.

Answer: (C)

Verified step by step guidance

1. Understand the concept of the Production Possibilities Frontier (PPF): it represents all the combinations of two goods that an economy can produce using all available resources efficiently.
2. Recall that points on the PPF curve indicate productive efficiency because the economy is utilizing all its resources without any waste.
3. Recognize that points inside the PPF represent inefficiency, as some resources are not fully employed, leading to less than maximum possible output.
4. Note that points outside the PPF are unattainable with current resources and technology, meaning the economy cannot produce those combinations at present.
5. Therefore, point P demonstrates productive efficiency because it lies exactly on the PPF, showing that resources are fully and efficiently used to produce the maximum possible output.