Quantities of goods and services we can produce are limited to our resources. If we want to increase our production of one good, we must decrease our production of something else. Production possibilities frontier: the boundary between these combinations of goods and services that can be produced and those that cannot (ppf) Production efficiency: producing goods and services at the lowest possible cost. Production inside the ppf is inefficient because resources are either unused or misallocated. Choices made along the ppf require a tradeoff. Production efficiency occurs at every point on the ppf but one pint is best. The point where goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. Allocative efficiency: the point on the ppf that we prefer above all other points. Unused: resources are unused when are they are idle but could be working.