This is not a dumb question at all.
"Teacup" is not an actual classification of dog. Teacup dogs are genetically engineered preemies created by unscrupulous breeders to satisfy the current trend of ‘smaller is cuter.’
A dog with dwarfism can also be passed off as a ‘teacup’ since as previously stated it isn’t an actual classification so there are no parameters.
The term ‘teacup’ is really just a marketing ploy.
Teacups typically have a myriad of expensive health issues due to prematurity or dwarfism and often have short lives.
The term "toy" is used to identify smaller dogs of a breed. Yorkies are classified as part of the toy terrier section of the terrier group so the phrase ‘toy Yorkie’ is actually redundant in that all Yorkies are by classification toys.
To answer the breeding issue, there is no circumstance in which I would ever breed a ‘teacup’ dog, particularly a female. There is no way a female of that size could carry a litter to term in safety.
If people would stop buying teacup dogs, the market would dry up and unscrupulous breeders would stop playing with genetics in their effort to get smaller and smaller dogs.
These genetic experiments result in some horrible things; if you don’t believe me I invite you to type "teacup dogs" into a search engine and read for yourself.
In my opinion, it is human greed at its most disgusting and it preys on innocent dogs who cannot help themselves.