When society produces the combination of goods and services on the PPF that it values the most highly,society has
A) achieved only production efficiency and definitely not allocative efficiency.
B) achieved only allocative efficiency definitely not production efficiency.
C) achieved both production efficiency and allocative efficiency.
D) achieved a free lunch.
E) perhaps achieved production efficiency and has perhaps achieved allocative efficiency.

Question

Quizplus · Accepted Answer

Production efficiency is achieved when the economy produces the maximum possible amount of goods and services given its resources and technology, which means the economy is on the PPF. Allocative efficiency is achieved when the economy produces the combination of goods and services that best satisfies the preferences and wants of society. When society produces the combination of goods and services on the PPF that it values the most highly, it indicates that the resources are being allocated in the best possible way, which means both production efficiency and allocative efficiency are achieved.

When Society Produces the Combination of Goods and Services on the PPF