When society produces the combination of goods and services on the PPF that it values the most highly, society has
A) achieved only allocative efficiency and definitely not production efficiency.
B) achieved a free lunch.
C) perhaps achieved production efficiency and perhaps achieved allocative efficiency.
D) achieved only production efficiency and definitely not allocative efficiency.
E) achieved both production efficiency and allocative efficiency.

Question

Quizplus · Accepted Answer

When society produces on the PPF, it is producing at the maximum possible amount, indicating production efficiency. Additionally, the society is producing the combination of goods and services that it values the most highly, which indicates allocative efficiency. Therefore, it has achieved both production efficiency and allocative efficiency.

When Society Produces the Combination of Goods and Services on the PPF