A point that lies inside the production possibilities frontier (PPF) reflects which of the following?

• A. Productive efficiency
• B. An unattainable combination of goods
• C. Productive inefficiency
• D. Maximum possible output

Answer: (C)

Verified step by step guidance

1. Understand what the Production Possibilities Frontier (PPF) represents: it shows the maximum possible output combinations of two goods that an economy can produce using all available resources efficiently.
2. Recall that points on the PPF curve represent productive efficiency, meaning resources are fully and efficiently utilized.
3. Recognize that points outside the PPF are unattainable with current resources and technology.
4. Identify that points inside the PPF indicate that resources are not being used efficiently, leading to productive inefficiency.
5. Conclude that a point inside the PPF reflects productive inefficiency because the economy could increase output of one or both goods without sacrificing anything.