<P> A PPF (production possibility frontier) typically takes the form of the curve illustrated above . An economy that is operating on the PPF is said to be efficient, meaning that it would be impossible to produce more of one good without decreasing production of the other good . In contrast, if the economy is operating below the curve, it is said to be operating inefficiently because it could reallocate resources in order to produce more of both goods or some resources such as labor or capital are sitting idle and could be fully employed to produce more of both goods . </P> <P> For example, if one assumes that the economy's available quantities of factors of production do not change over time and that technological progress does not occur, if the economy is operating on the PPF, production of guns would need to be sacrificed to produce more butter . If production is efficient, the economy can choose between combinations (points) on the PPF: B if guns are of interest, C if more butter is needed, D if an equal mix of butter and guns is required . </P> <P> In the PPF, all points on the curve are points of maximum productive efficiency (no more output of any good can be achieved from the given inputs without sacrificing output of some good); all points inside the frontier (such as A) can be produced but are productively inefficient; all points outside the curve (such as X) cannot be produced with the given, existing resources . Not all points on the curve are Pareto efficient, however; only in the case where the marginal rate of transformation is equal to all consumers' marginal rate of substitution and hence equal to the ratio of prices will it be impossible to find any trade that will make no consumer worse off . </P> <P> Any point that lies either on the production possibilities curve or to the left of it is said to be an attainable point: it can be produced with currently available resources . Points that lie to the right of the production possibilities curve are said to be unattainable because they cannot be produced using currently available resources . Points that lie strictly to the left of the curve are said to be inefficient, because existing resources would allow for production of more of at least one good without sacrificing the production of any other good . An efficient point is one that lies on the production possibilities curve . At any such point, more of one good can be produced only by producing less of the other . </P>

Of all the points on the production possibilities curve only one point represents an efficient point