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We can show economic efficiency: A. with points on the production possibilities frontier. B. with points inside and on the production possibilities frontier. C. with points outside the production possibilities frontier. D. with points inside the production possibilities frontier. E. with points on and outside the production possibilities frontier.

Ask by Griffiths Peters. in the United States
Feb 03,2025

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Answer

Economic efficiency is shown by points **on** the production possibilities frontier.

Solution

Economic efficiency, in the context of the **Production Possibilities Frontier (PPF)**, refers to the optimal production point where resources are fully and efficiently utilized. Here's a breakdown of the options provided: - **A. With points on the production possibilities frontier.** **Correct.** Points **on** the PPF represent combinations of goods where resources are fully and efficiently utilized. Any point on the frontier signifies maximum possible production of one good for a given production level of another good, indicating economic efficiency. - **B. With points inside and on the production possibilities frontier.** **Incorrect.** Points **inside** the PPF indicate that resources are not being fully utilized, representing inefficiency. Only points **on** the PPF denote efficiency. - **C. With points outside the production possibilities frontier.** **Incorrect.** Points **outside** the PPF are **unattainable** with the current resource allocation and technology. They do not represent feasible or efficient production levels. - **D. With points inside the production possibilities frontier.** **Incorrect.** As mentioned, points **inside** the PPF reflect underutilization of resources, leading to inefficiency. - **E. With points on and outside the production possibilities frontier.** **Incorrect.** While points **on** the PPF are efficient, points **outside** are unattainable and do not represent efficiency. **Conclusion:** The correct answer is **A. with points on the production possibilities frontier.**

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Points on the production possibilities frontier (PPF) represent economic efficiency because they indicate that resources are being utilized to their fullest potential, given current technologies and resources. In this scenario, producing more of one good would mean producing less of another, demonstrating the trade-offs that characterize efficient resource allocation. Points inside the PPF, on the other hand, showcase inefficiency, as more of one or both goods could be produced without sacrificing production of another good. Thus, the goal for any economy is to move towards the frontier, maximizing output and efficiency over time.

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