What does a production possibility frontier illustrate about an economy?

The production possibility frontier (PPF) is a graphical representation that illustrates the various combinations of two goods or services that an economy can produce given its resources and technology, assuming full efficiency. The PPF shows the trade-offs and opportunity costs associated with the production of different goods. Points along the frontier indicate efficient use of resources, where the economy is maximizing its output. If the economy operates inside the curve, it demonstrates inefficiency, as it could produce more of one or both goods without sacrificing the production of another.

The PPF also highlights the concept of opportunity cost, allowing economists to understand the cost of allocating resources towards one good over another. This relationship provides valuable insights into the production efficiency and resource allocation within the economy. Thus, the option that identifies efficiency of production as being illustrated by the PPF is the correct understanding of what the frontier represents in the context of an economy.