Question

T/F: Efficient means that a small proportion of total resources contributes to productivity during the manufacturing process; inefficient means that a large proportion of resources contributes to productivity.

Answer 1

Productive efficiency is the optimal use of resources in production, while allocative efficiency refers to producing the goods that are most valued by society. Efficient means using resources effectively, while inefficient means wasteful production.

Step-by-step explanation:

Productive efficiency means that, given the available inputs and technology, it is impossible to produce more of one good without decreasing the quantity that is produced of another good. All choices on the PPF in Figure 2.4, including A, B, C, D, and F, display productive efficiency. As a firm moves from any one of these choices to any other, either healthcare increases and education decreases or vice versa.

Allocative efficiency means that the particular mix of goods being produced, represents the allocation that society most desires. It refers to producing the combination of goods that are most valued by society. For example, if society values healthcare more than education, an allocatively efficient allocation would produce more healthcare and less education, based on the available resources.

In summary, efficient means that resources are used optimally and effectively, producing goods in the desired quantities. Inefficient means that resources are not used optimally and effectively, resulting in wasteful production.