Question

Production inefficiency occurs A. only when the economy produces outside the production possibility frontier. B. only when an economy produces at the wrong point on the production possibility frontier. C. only when an economy produces underneath its production possibility frontier. D. 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.

Answer 1

Production inefficiency occurs 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.

Answer: Option D.

Explanation:

A country prosperous economically when there is an effective production of its goods and services. But many a times there is a inefficiency in production, and this mainly occurs because of the decrease in production. When a economy manufacturers its output and products at the very minimum cost or at the same or equal cost, that’s when the production inefficiency occurs. Even when the combination of products aren't right, can lead to decrease in productivity. In such cases it is important to look out for the preventive measures for the economy to grow.