Final answer:
People tend to perform best when they are being observed by a critical audience due to increased physiological arousal and the motivation to give their best effort.
Step-by-step explanation:
Evaluation apprehension helps explain why people perform best when they are being observed by a critical audience. This is because the presence of an audience enhances one's physiological arousal, providing the motivation needed to give 100% during a performance. For example, in a group setting, if your performance cannot be evaluated, there may be less motivation to excel.
However, when faced with a complex and difficult task, people feel a greater urge to contribute significantly if they believe the group relies on their input. This phenomenon is the opposite of social loafing, wherein individuals exert less effort in group tasks when their efforts are not tracked.
Therefore, people will perform their best with a critical audience that can evaluate their performance, creating a balance between motivation and performance anxiety.