An economy that is producing at a point under or above its production possibility frontier is functioning eﬃciently.

Question

Quizplus · Accepted Answer

An economy that is producing under its production possibility frontier is operating inefficiently as it is not fully utilizing its resources. An economy that is producing above its production possibility frontier is also not sustainable in the long run and may lead to inflation or resource depletion. Therefore, an economy is only functioning efficiently when it is producing at a point on its PPF.

An Economy That Is Producing at a Point Under or Above