The correct option is 1 and 3 only.
Explanation
The Production Possibility Frontier (PPF), also known as the Production Possibility Curve (PPC), is a graphical representation illustrating the possible combinations of two goods that an economy can produce with available resources and given technology, assuming resources are fully and efficiently utilized.
Statement-wise Analysis:
- Statement 1 is Correct: The PPF defines the limit or boundary of production. It shows the maximum possible output combinations of two goods that can be generated when the economy's finite resources (land, labor, capital) are fully employed and the technology is constant.
- Statement 2 is Incorrect: A point on the PPF represents productive efficiency, meaning resources are fully utilized. A point inside the PPF indicates that the economy is operating inefficiently or that resources are underutilized (e.g., unemployment). Points outside the PPF are currently unattainable.
- Statement 3 is Correct: The slope of the PPF represents the opportunity cost (Marginal Rate of Transformation). If the PPF is a straight line, it implies that the opportunity cost is constant; this occurs when resources are perfectly substitutable between the production of the two goods. Typically, the PPF is concave to the origin, indicating increasing opportunity cost.
Key Takeaway:
The PPF demonstrates the economic concepts of scarcity, choice, and opportunity cost. Efficiency is achieved only at points lying on the curve, while the shape of the curve (straight vs. concave) is determined by the nature of opportunity costs.