-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) allocative efficiency is achieved but production efficiency is not achieved because there are no tacos being produced.
B) both allocative and production efficiency are achieved.
C) production efficiency is achieved but allocative efficiency is not achieved because there are no tacos being produced.
D) production efficiency is achieved but allocative efficiency is not achieved because the number of tacos produced is at its absolute maximum.
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) allocative efficiency is achieved but production efficiency is not achieved because there are no tacos being produced. 
B) both allocative and production efficiency are achieved. 
C) production efficiency is achieved but allocative efficiency is not achieved because there are no tacos being produced. 
D) production efficiency is achieved but allocative efficiency is not achieved because the number of tacos produced is at its absolute maximum. 
E) neither allocative nor production efficiency has been achieved.

Quizplus · Accepted Answer

Allocative efficiency is achieved when the marginal cost equals the marginal benefit, as is the case at point A. Production efficiency is achieved when goods are produced at the lowest possible cost, which is also true for point A on the production possibilities frontier.

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