Question

3) Allocative efficiency is achieved when A) there are no shortages or surpluses in the market. B) firms produce goods and services at the lowest cost. C) firms produce the goods and services that consumers value most. D) goods and services are fairly distributed among consumers in an economy.

Answer 1

3). The allocative efficiency is achieved whenever there is optimal production of goods and service in the economy. The allocative efficiency is achieved when the price equals the marginal cost of the production or where the marginal benefit equals the marginal cost of the production.

Ans: C). Firms produce goods and services that consumers value the most.

9). The production possibility curve shows all possible combinations of two goods that can be produced with the given level resources and technology. A bowed out PPF shows increasing opportunity cost, we have to forgone more of one commodity to produce an additional unit of the other commodity. A bowed inward PPF shows decreasing opportunity cost, and a straight line PPF shows constant opportunity cost.

Ans: Straight line (Not in the options).

17). If the supply of the apple has decreased the supply curve would shift to the left, only a price changes indicates a movement along the supply curve.

Ans: a). The supply curve for the market has shifted left.