Given a table showing the maximum output combinations of two goods in an economy, what does a point located on the Production Possibilities Frontier (PPF) represent?

• A. An unattainable combination of goods with current resources
• B. A situation where only one good is produced and the other is ignored
• C. Productive efficiency, where resources are fully and efficiently utilized
• D. Productive inefficiency, where resources are underutilized

Answer: (C)

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 any point on the PPF curve shows a combination where resources are fully employed and used efficiently, meaning the economy cannot produce more of one good without producing less of the other.
3. Identify that points inside the PPF indicate productive inefficiency, where some resources are underutilized or wasted.
4. Note that points outside the PPF are unattainable with current resources and technology, representing combinations that the economy cannot produce at this time.
5. Conclude that a point on the PPF represents productive efficiency, where the economy is maximizing output and using resources in the best possible way.