Which of the following scenarios is illustrated by a point located on the production possibilities frontier (PPF)?

• A. Unemployment of resources, with production inside the PPF
• B. Productive efficiency, where resources are fully utilized
• C. Allocative inefficiency, with resources not used in their best possible way
• D. Impossible production, with output combinations outside the PPF

Answer: (B)

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 using all available resources efficiently.
2. Recognize that any point on the PPF curve indicates that resources are fully and efficiently utilized, meaning the economy is productively efficient.
3. Identify that points inside the PPF represent underutilization or unemployment of resources, where the economy is not producing at its full potential.
4. Note that points outside the PPF are unattainable with the current resources and technology, representing impossible production combinations.
5. Understand that allocative inefficiency refers to producing a combination of goods that does not maximize societal welfare, which can occur even on the PPF, but the key characteristic of a point on the PPF is productive efficiency.