Question

Allocative efficiency occurs:

a. Anywhere inside or on the production possibilities frontier.
b. When the total cost of production is minimized
c. At all points on the production possibilities frontier.
d. At only one point on the production possibilities frontier.
e. At the points where the production possibilities frontier crosses the horizontal or vertical axis.

Answer 1

a. Anywhere inside or on the production possibilities frontier.

Step-by-step explanation:

In an economy, the allocative efficiency may be defined as the economic state where the production of various goods or services is aligned with the preferences with the consumers.

The allocative efficiency always materializes at the intersection of the supply curves and the demand curves.

On the
`\text{equilibrium point,}` the price for a supply
`\text{exactly matches}` with the demand for the product
`\text{for that supply}` at that price, and thus all the products are sold.

It occurs anywhere on the production possibilities frontier or on the inside of the frontier.

Therefore, the correct option is (a).