-The table above shows the production possibilities for an economy.When the economy produces a combination of 900 books and 50 loaves of bread,
A) production efficiency occurs because resources are not overused.
B) allocative efficiency is achieved because both goods are produced.
C) production efficiency is not achieved.
D) allocative and production efficiency are both achieved.
E) production efficiency is not achieved but allocative efficiency might be achieved.

Question

-The table above shows the production possibilities for an economy.When the economy produces a combination of 900 books and 50 loaves of bread,
A) production efficiency occurs because resources are not overused. 
B) allocative efficiency is achieved because both goods are produced. 
C) production efficiency is not achieved. 
D) allocative and production efficiency are both achieved. 
E) production efficiency is not achieved but allocative efficiency might be achieved.

Quizplus · Accepted Answer

EProduction efficiency refers to a situation where the maximum possible output is produced with the given resources and technology, meaning no more of one good can be produced without producing less of another. Without the table, we can't see the specific trade-offs, but the statement implies that the combination of 900 books and 50 loaves of bread does not represent a point on the production possibility frontier (PPF), indicating production inefficiency. Allocative efficiency, on the other hand, depends on the preferences of society for the mix of different goods and services produced. It's possible that this combination of goods meets the desired allocation of resources according to societal preferences, even if it's not on the PPF, hence why allocative efficiency might be achieved despite the lack of production efficiency.

-The Table Above Shows the Production Possibilities for an Economy