The Production Possibilities Boundary Shows Possible Combinations of Guns and Butter

The production possibilities boundary shows possible combinations of guns and butter that can be produced by a country. The lower diagram shows demand and supply for butter.
FIGURE 12-2
-Refer to Figure 12-2. Suppose demand and supply for butter are shown by D and S, respectively. And suppose the economy is at point b) on the production possibilities boundary, producing Q1 units of butter. We can say that this economy is efficient because .

A) allocatively; guns and butter are both produced to the point where the marginal cost to producers equals the marginal value to consumers
B) productively; the marginal cost of production across guns and butter is equated
C) allocatively; the price of guns is equal to the price of butter
D) productively; the economy is operating at a point inside the production possibilities boundary
E) allocatively; the economy is operating at a point on the production possibilities boundary