Question

When production efficiency does NOT​ occur,

i. an economy is producing at a point within its

PPF.

ii. there are unemployed resources.

iii. allocative efficiency can not occur.

A.i only

B.iii only

C.​i, ii, and iii

D.i and ii

E.

i and iii

Answer 1

Answer -D because

1. When production effeciency does not occur , an economy is producing at a point within its PPF. Production possibility frontier is the curve which presents the best possible combinations the economy can produce with 2 outputs assuming that resources , technology are fixed and resources are used maximum.So all the points on the PPF curve represents effecient production and points within the curve represents that production effeciency does not occur.

2. When production effeciency does not occur, there are unemployed resources because production effeciency means that all the resources are used to their maximum level and if production is not effecienct it means that resources are unemployed and they can be used to achieve the effeciency level.

Point 3 -allocative effeciency cannot occur - in not included in an answer because allocatice effeciency is concerned with allocation or distribution of resources in the society where as production effeciency is concerned with maximum production of goods with combination of 2 . An economy may have production effeciency but if resources are not properly allocated , allocative effeciency cannot be achieved. So these are 2 different concepts.