Question

Inefficiency from the misallocation of resources is located on what point of the Production Possibility Frontier graph?

         a. Inside the slope b. Outside the slope c. on the slope d. Not on the graph

Answer 1

Answer. (a) inside the slope

Explanation: A production possibility frontier (PPF) is a graph that shows various bundles of two goods that can be produced in an economy by using all the available resources. Therefore if you have to produce more of one good, you have to use more resources, and thus the other good is produced less. This way the whole locus is constructed. Now any point inside the graph shows that all the resources are not being utilised and there is still potential in the economy to improve production of both the goods. Thus this point represents inefficiency from misallocation of resources. On the other hand, any point outside the curve represents quantities which can't be produced because there aren't enough resources available in the economy.