Productive vs Allocative Efficiency Quiz

What is productive efficiency concerned with?

• Optimal distribution of goods and services

• Producing goods at the lowest cost

• Setting prices higher than marginal cost

• Equating social marginal benefit and cost

What does allocative efficiency focus on?

• Producing at the lowest point of the SRAC curve

• Producing goods at the lowest cost

• Optimal combination of inputs

• Optimal distribution of goods and services

Where does productive efficiency occur?

• On the demand curve

• On the production possibility frontier

• At the highest point of the SRAC curve

• Where price equals marginal cost

What is the relationship between price and marginal cost in allocative efficiency?

• There is no relationship

• Price is higher than marginal cost

• Price equals marginal cost

• Price is lower than marginal cost

Can an economy be productively efficient but allocatively inefficient?

• No, productive efficiency ensures allocative efficiency

• Yes, but only in a monopoly

• Yes, if it produces goods not needed by society

• No, because allocative efficiency is not important

Why are monopolies often considered allocatively inefficient?

• Because they produce at the highest cost

• Because they set the price higher than marginal cost

• Because they set prices equal to marginal cost

• Because they are productively efficient

Can we have allocative efficiency without productive efficiency?

• No, because allocative efficiency depends on price alone

• Yes, but only in short-run scenarios

• No, productive efficiency is a prerequisite for allocative efficiency

• Yes, if the marginal benefit is maximized

What does the lowest point on the SRAC curve indicate?

• Maximum profit

• Allocative efficiency

• Productive efficiency

• Technical inefficiency

What does social efficiency take into account?

• Only the benefits of production

• All externalities

• Only the cost of production

• Only the price of goods

What is the result of productive efficiency in terms of cost?

• Lowest possible production cost

• Variable production cost

• Marginal production cost

• Highest possible production cost