Question

If a business is using factors of production 100% efficiently, the plot will be on the curve. However, most business efficiency falls inside the
curve. Why is this?

A. They are not making efficient use of their factors
of production.

B. They are making over 100% efficient use of their
factors of production.

C. They are making inequitable use of their factors
of production.

Answer 1

Answer: A. They are not making efficient use of their factors of production.

Explanation:

Production Possibilities Curve helps in capturing opportunity cost and scarcity when an economy produces two goods or services.

It should be noted that the points on the interior of the PPC simply means that the economy is inefficient. The points on the PPC implies that the economy is efficient, while the points beyond the PPC simoky means that they are unattainable.

Based on the question, the production points inside the curve simply implies that the economy isn't producing at its comparative advantage, and therefore, they are not making efficient use of their factors of production.