Which of the following statements is correct?
A)Mrs.Lovejoy decides to invest in companies which she believes are producing their goods based on the preferences of consumers.Mrs.Lovejoy is therefore investing in companies that are allocatively efficient.
B)Mrs.Lovejoy decides to invest in companies which she believes are producing their goods based on the preferences of consumers.Mrs.Lovejoy is therefore investing in companies that are productively efficient.
C)Mrs.Lovejoy decides to invest in companies which she believes can produce their goods at the lowest possible cost.Mrs.Lovejoy is therefore investing in companies that are allocatively efficient.
D)Mrs.Lovejoy decides to invest in companies which she believes can produce their goods at the lowest possible cost.Mrs.Lovejoy is therefore investing in companies that are both allocatively and productively efficient.

Question

Quizplus · Accepted Answer

Allocative efficiency is achieved when resources are allocated in a way that is consistent with consumer preferences. Therefore, if Mrs. Lovejoy is investing in companies that are producing goods based on consumer preferences, she is investing in companies that are allocatively efficient. Productive efficiency, on the other hand, refers to producing goods at the lowest possible cost.

Which of the Following Statements Is Correct