Asked by Marina Carosella on May 19, 2024
Verified
Allocative efficiency refers to:
A) the use of the least-cost method of production.
B) the production of the product mix most wanted by society.
C) the full employment of all available resources.
D) production at some point inside of the production possibilities curve.
Allocative Efficiency
A state of the economy in which production represents consumer preferences; specifically, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.
Production Possibilities Curve
A visual diagram illustrating the highest potential production mixes of two products or services that an economy can reach when it uses all its resources in a completely efficient manner.
- Elucidate the notions of productive and allocative efficiency, highlighting the differences therein.
Verified Answer
AG
Alice GathoniMay 22, 2024
Final Answer :
B
Explanation :
Allocative efficiency refers to producing the combination of goods and services that satisfies consumers' wants and needs at the lowest possible cost. This means producing the product mix most wanted by society, which is option B. The other options do not necessarily ensure allocative efficiency.
Learning Objectives
- Elucidate the notions of productive and allocative efficiency, highlighting the differences therein.