(Figure: PPF of Econia (a small nation)) Looking at the production possibilities frontier (PPF) of Econia, assume that the country is producing at point D. All of the 300 bales of wheat are eaten but some people remain hungry. Over 100 of the 520 bales of cotton remain unused. Which statement is correct regarding efficiency in Econia?

Question

Quizplus · Accepted Answer

Point D on the production possibilities frontier (PPF) represents a situation of inefficiency in Econia as it is producing less than it is capable of. Specifically, while all 300 bales of wheat are being used, over 100 of the 520 bales of cotton remain unused. Moving to point B on the PPF would result in both greater production and allocative efficiency. At point B, the country would produce more of both cotton and wheat (compared to point D) and could allocate resources in such a way as to eliminate hunger while also reducing the amount of cotton that goes unused. Therefore, D is an inefficient point of production, and moving to B would improve both production and allocative efficiency.

(Figure: PPF of Econia (A Small Nation)) Looking at the Production