Question

if a certain combination of goods and services lies inside the production possibilities curve for an economy, which of these is true?
a that combination is an inefficient use of resources
b resources are being used more efficiently now than in the past.
c this economy must be realizing gains from specialization and trade.
d more resources must be obtained to attain that combination of goods and services.
e it is impossible for an economy to operate inside its production possibilities curve.

Explanation:

To solve this, we analyze each option based on the concept of the production possibilities curve (PPC):

• Option A: Points inside the PPC represent underutilization of resources, meaning inefficiency. This matches the definition.
• Option B: A point inside the PPC doesn't imply better efficiency than the past; it just means current inefficiency. Eliminate.
• Option C: Gains from specialization and trade relate to moving along or expanding the PPC, not being inside. Eliminate.
• Option D: Points inside the PPC are achievable with current resources (just inefficiently), so no need for more resources. Eliminate.
• Option E: Operating inside the PPC is possible (though inefficient), so this is false. Eliminate.

Answer:

A. That combination is an inefficient use of resources