Question:
An economy has achieved productive efficiency when
(1) it is unable to produce more of one good without producing less of another.
(2) the marginal cost of producing each good is equal to its price.
(3) it has eliminated all negative externalities.
(4) the resources are allocated to produce goods and services most wanted by society.
(5) it is self-sufficient in all products.
Correct Answer:
(1)
Answer Explanation:
Productive efficiency means an economy is operating on its Production Possibilities Frontier (PPF). At this point, all resources are fully utilized, meaning the only way to produce more of Good A is to sacrifice some production of Good B (incurring an opportunity cost).
Topic: Economic Efficiency Year: 2017
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