Production inefficiency occurs
A) only when an economy produces underneath its production possibility frontier.
B) only when an economy produces at the wrong point on the production possibility frontier.
C) either when an economy produces underneath the production possibility frontier or when the economy is producing the wrong combination of goods on the production possibility frontier.
D) only when the economy produces outside the production possibility frontier.

Question

Quizplus · Accepted Answer

Production inefficiency occurs when an economy is not fully utilizing its resources, which is represented by producing underneath its production possibility frontier (PPF). This indicates that the economy could produce more of one or both goods without sacrificing the production of the other, suggesting underutilization of resources.

Production Inefficiency Occurs