Which of the following is a true statement? (Check all that apply.)

		A technological improvement isolated to one sector can indirectly result in more production in all other sectors.
		All points on the PPF are productively efficient.
		It is possible for a point to be allocatively efficient without being productively efficient.
		PPFs slope down for the same reason that the demand curve slopes down.

Solutions

Expert Solution

Solution:

7. Statement - 2 is True which states All points on the PPF are productively efficient.

The Reason:

Various points present on the PFF are the different combinations of two goods that can be produced in an economy. All these points are productively efficient but resources are differently allocated.

All the points inside the PPF are inefficient production combinations and all the points outside the PPF are the unattainable combinations that the economy cannot produce with the present set of resources.

Therefore. all the points on the PPF are productively efficient.

Reasons for other incorrect options:

Statement - 1 is False because the technological improvement of one sector results in more production only of that one sector. For eg- Newly updated machinery imported for the production of guns cannot result in more production of wheat. Therefore, this statement is false.

Statement - 3 is False because it is not possible to be allocatively efficient without being productively efficient as allocatively efficient means right worker at the right production unit and if the right worker is at the right production unit, productively efficient is surely gained. Allocative efficiency and Productive efficiency are complementary to each other. So, if one is achieved, the other is likely to be followed. Therefore, this statement is false.

Statement - 4 is False because PPF slopes downward because more and more of a good is sacrificed in order to produce more of the other good but the demand curve slopes downwards because as the price decreases more and more quantity is demanded of a good and vice-versa. These reasons are not the same. Therefore, this statement is false.

Rahul Sunny answered 1 year ago

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