When producing at a point of production efficiency,
A)our choice of goods to produce can be either on or inside the production possibilities frontier.
B)we can satisfy all our wants.
C)the opportunity cost of producing goods other than those measured on the axes of the production possibilities frontier is zero.
D)we face a tradeoff and incur an opportunity cost.
E)resources are either unused or misallocated.

Question

Quizplus · Accepted Answer

When producing at a point of production efficiency, we face a tradeoff and incur an opportunity cost because resources are limited and must be allocated among alternative uses. It is not necessary for the choice of goods to produce to be on or inside the production possibilities frontier, we may still be able to produce more of something without sacrificing the production of something else. Also, producing at a point of production efficiency does not mean that we can satisfy all our wants, as wants are infinite and resources are limited. Similarly, the opportunity cost of producing goods that are not measured on the axes of the production possibilities frontier is not necessarily zero. Finally, if resources are at a point of production efficiency, it means that they are being fully utilized and not misallocated.

When Producing at a Point of Production Efficiency