Which one of the following statements is true with regard to an economy which is on its production possibility frontier?
* Being “on its production possibility frontier” means the economy is operating at full efficiency, with no unemployed or underutilized resources.
* Option A is true because, when an economy is on the PPF, resources are fully employed. To increase the production of one commodity, resources must be shifted away from the production of the other commodity, leading to a decrease in its output. This sacrifice is known as the opportunity cost.
* Option B is false. The PPF itself represents the limit or constraint on production given the current resources and technology. An economy on the PPF is producing the maximum possible.
* Option C is false. This statement describes moving from a point *inside* the PPF (inefficient production) to a point *on* the PPF (efficient production). An economy already on the PPF cannot increase production of one commodity without decreasing the production of another, assuming technology and resources remain constant.
* Option D is false. The PPF is typically downward sloping because to produce more of one good, you must produce less of the other (trade-off). It is usually concave (bowed outwards) or straight, but never upward sloping. An upward sloping curve would imply you could produce more of both goods simultaneously, which is impossible when resources are fully and efficiently utilized.