When a firm or economy is operating efficiently, it is operating a. outside its production possibilities frontier. b. inside its production possibilities frontier. c. at the intersection of the production possibilities frontier and the horizontal axis. d. at the intersection of the production possibilities frontier and the vertical axis. e. on its production possibilities frontier.

When a firm or economy is operating efficiently, it is on its production possibilities frontier. This means that resources are being utilized to their fullest potential, and producing more of one good would result in the production of less of another. Essentially, they are maximizing output with the available resources. Historically, the concept of the production possibilities frontier (PPF) was developed during the late 19th and early 20th centuries as part of economic theory to illustrate trade-offs and opportunity costs. Economists like Arthur C. Pigou contributed to this framework, allowing for better visualizations of economic efficiency and the impact of resource allocation on production outputs.