-The figure above shows a nation's production possibilities frontier. If the marginal cost equals the marginal benefit at point A when 4 million pizzas are produced,
A) production efficiency is achieved but allocative efficiency is not achieved because there are no tacos being produced.
B) production efficiency is achieved but allocative efficiency is not achieved because the number of tacos produced is at its absolute maximum.
C) allocative efficiency is achieved but production efficiency is not achieved because there are no tacos being produced.
D) both allocative and production efficiency are achieved.
E) neither allocative nor production efficiency has been achieved.

Question

-The figure above shows a nation's production possibilities frontier. If the marginal cost equals the marginal benefit at point A when 4 million pizzas are produced,
A) production efficiency is achieved but allocative efficiency is not achieved because there are no tacos being produced. 
B) production efficiency is achieved but allocative efficiency is not achieved because the number of tacos produced is at its absolute maximum. 
C) allocative efficiency is achieved but production efficiency is not achieved because there are no tacos being produced. 
D) both allocative and production efficiency are achieved. 
E) neither allocative nor production efficiency has been achieved.

Quizplus · Accepted Answer

Allocative efficiency is achieved when marginal cost equals marginal benefit, and production efficiency is achieved when production is on the production possibilities frontier. At point A, both conditions are met.

-The Figure Above Shows a Nation's Production Possibilities Frontier