When an economy produces at its allocatively efficient production point
A) scarcity is not a problem.
B) resources are not limited.
C) a society can increase the production of all goods.
D) a society can increase the production of one good only by decreasing the production of some other good that is valued more highly.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are distributed in a way that maximizes the net benefit to society. At this point, to increase production of one good, society must reduce production of another good that is valued more highly, indicating a trade-off due to scarce resources. Choices A, B, and C suggest scenarios that ignore the fundamental economic problem of scarcity and the trade-offs it necessitates.

When an Economy Produces at Its Allocatively Efficient Production Point