Which of the following describes the maximum output that can be produced with a fixed set of inputs?

• A. Consumer Surplus
• B. Production Possibilities Frontier (PPF)
• C. Law of Diminishing Returns
• D. Marginal Rate of Substitution (MRS)

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of 'maximum output with a fixed set of inputs.' This refers to the greatest quantity of goods or services that can be produced given the available resources and technology.
2. Step 2: Review the definitions of the options: Consumer Surplus measures the difference between what consumers are willing to pay and what they actually pay; Law of Diminishing Returns describes how adding more of one input, holding others constant, eventually yields smaller increases in output; Marginal Rate of Substitution (MRS) relates to consumer preferences and trade-offs between goods.
3. Step 3: Recognize that the Production Possibilities Frontier (PPF) represents the boundary showing the maximum feasible output combinations of two goods that can be produced with a fixed set of inputs and technology.
4. Step 4: Understand that points on the PPF curve indicate efficient production levels where resources are fully utilized, while points inside the curve indicate inefficiency and points outside are unattainable with current resources.
5. Step 5: Conclude that the PPF best describes the maximum output achievable with fixed inputs, as it visually and conceptually captures the trade-offs and limits of production capacity.