Your browser seems to have Javascript disabled. The production possibilities frontier can illustrate two kinds of efficiency: productive efficiency and allocative efficiency. This preview shows page 79 - 81 out of 116 pages.. 7. Productive efficiency refers to: 1. the use of the least-cost method of production. Points B, C and D on the diagram are considered to be productively efficient as it is not possible to produce more of either good without having to reduce the production of the other. Productive efficiency refers to _____. D. production at some point inside of the production possibilities curve. Answer to: The term allocative efficiency refers to By signing up, you'll get thousands of step-by-step solutions to your homework questions. These are the two… Productive inefficiency happens when factors of production (i.e. Economic efficiency is basically just a measure of how good things are economically, compared to how good they could potentially be. Depending on the context, it is usually one of the following two related concepts: Allocative or Pareto efficiency: any changes made to assist one person would harm another. The factory can be very productive ¡, but not efficient. Related to productive efficiency is … A productively efficient economy always produces on its production possibility frontier. Allocative efficiency is a special type of productive efficiency in which the right amount of goods is produced to benefit society in the best way. It is a situation where the economy can produce more of one product without affecting other production processes. Nt the same in the context of the statement. the production of the product mix most wanted by society. C) the full employment of all available resources. i.e. Productive efficiency refers to the production of goods and services through an optimal combination of inputs in order to produce maximum output at minimum cost. If the economy is wasting resources, it means that it is not producing as much as it could potentially produce. Efficiency requires … B. the production of the product-mix most wanted by society. In principle, any input can be used in the Productivity, in economics, the ratio of what is produced to what is required to produce it. A) the use of the least-cost method of production. g Productive efficiency refers to Multiple Choice the use of the least-cost method of production. When this happens, the economy shifts from point A to point D and is better utilizing its resources. of the production possibilities curve. Call 08106304441, 07063823924 To Register! Terms in this set (10) The term productive efficiency refers to: -the production of a good at the lowest average total cost. The formula for determining economic efficiency is as follows: These firms are thus considered to be X-inefficient. Cost minimization, where P = minimum ATC Production B. This page was last changed on 29 June 2015, at 14:33. In practice: Productive efficiency – yes. where marginal costs equal average costs). Firms would want to minimise cost and strive to achieve productive efficient. Register or login to make commenting easier. By definition, the MC curve will meet the ATC curve at its minimum point, which is the point P1 and Q1 on the diagram. SPECIAL: Gain Admission Into 200 Level To Study In Any University Via IJMB | NO JAMB | LOW FEES | Call 08106304441, 07063823924 To Register! Productive efficiency similarly means that an entity is operating at maximum capacity. Productive efficiency refers to the maximum amount of output that an economy can produce at a certain point in time. Productive efficiency is the optimum method of production of products at lowest costs. Which of the following will cause a decrease in market equilibrium price and an ... Allocative efficiency occurs only at that output where: Use the table below to answer the question below. Productive and Allocative Efficiency. Assessing the efficiency of firms is a powerful means of evaluating performance of firms, and the performance of markets and whole economies. Hence, the point P1 and Q1 would be a point that is just right, and all the resources of the firm would be fully used in the best possible way. So, the more effort, time or raw materials required to do the work, the less efficient the process. However, if the economy was originally producing at point D and wants to produce more butter, the production of guns would have to be reduced. All choices along the PPF in Figure 1, such … Are two concepts achieved in the long run in a perfectly competitive market, labor, capital or )... Relevant educational content, resources and information for students ) the full answer mix... Just a measure of how good they could potentially be d ) at... 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