Suppose that Ned can produce either potato chips or computer chips. If Ned is operating on his production possibilities frontier (PPF), what does this indicate about his production?

• A. Ned is producing more than his maximum possible output.
• B. Ned is underutilizing some of his resources.
• C. Ned is using all available resources efficiently.
• D. Ned can increase production of both goods without sacrificing the other.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a Production Possibilities Frontier (PPF): it represents the maximum possible output combinations of two goods that a producer can achieve using all available resources efficiently.
2. Recognize that if Ned is operating on his PPF, it means he is producing at a point where all resources are fully utilized without any waste.
3. Recall that producing on the PPF implies that increasing the production of one good requires sacrificing some amount of the other good, due to the trade-off and opportunity cost.
4. Identify that producing more than the maximum possible output is impossible, so Ned cannot be producing beyond the PPF.
5. Conclude that being on the PPF means Ned is using all available resources efficiently, and cannot increase production of both goods simultaneously without sacrificing one.