Points that
lie strictly to the left of the curve
are said to be inefficient, because existing resources would allow for production of more of at least one good without sacrificing the production of any other good. … At any such point, more of one good can be produced only by producing less of the other.
What is a point of efficiency?
Productive efficiency means that, given the available inputs and technology, it’s impossible to produce more of one good without decreasing the quantity of another good that’s produced. All choices along the PPF in Figure 2, such as points A, B, C, D, and F, display productive efficiency.
What is an inefficient point in economics?
All points inside PPF are inefficient points. These points are attainable (e.g., point U),
but they are not using the resources at the fullest
. At point U, if technology or resources are used at full capacity, the economy could be at point B or C, meaning more would be produced.
Which point is attainable inefficient?
Point X
is inefficient but attainable. We are not using all of our resources because they are either unemployed or misallocated. Point Y is unattainable.
What is a productive inefficient point?
When
output occurs at a cost higher than minimum average cost
(any point other than the lowest point on the average cost curve) and at a point where some resources are not utilised (and point within and not on the PPF)
What is an unattainable point?
Points that lie to the right of the production possibilities curve
are said to be unattainable because they cannot be produced using currently available resources.
What are the 3 key economic questions?
- What to produce? ➢ What should be produced in a world with limited resources? …
- How to produce? ➢ What resources should be used? …
- Who consumes what is produced? ➢ Who acquires the product?
Which efficiency refers to getting the most for the least?
Efficiency
refers to getting the most output from the least amount of inputs or resources. Managers deal with scarce resources (including people, money, and equipment) and want to use those resources efficiency.
What is the point of allocative efficiency?
Allocational efficiency represents
an optimal distribution of goods and services to consumers in an economy
, as well as an optimal distribution of financial capital to firms or projects among investors. Under allocational efficiency, all goods, services, and capital is allotted and distributed to its very best use.
Is Pareto efficiency possible?
Pareto efficiency is when an economy has its resources and goods allocated to the maximum level of efficiency, and no change can be made without making someone worse off.
Pure Pareto efficiency exists only in theory
, though the economy can move toward Pareto efficiency.
Why is a PPF curved?
The first is the fact that the budget constraint is a straight line. This is because its slope is given by the relative prices of the two goods. In contrast, the PPF has a curved shape
because of the law of the diminishing returns
.
Why is it impossible for the economy to be outside or above the PPF?
The Pareto Efficiency, a concept named after Italian economist Vilfredo Pareto, measures the efficiency of the commodity allocation on the PPF. … Conversely, any point outside the PPF curve is impossible
because it represents a mix of commodities that will require more resources to produce than are currently obtainable
.
Why is PPC concave?
Production Possibility Curve (PPC) is concave to the
origin because of the increasing opportunity cost
. As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. … And this causes the concave shape of PPC.
What are the 3 shifters of PPC?
- Change in the quantity or quality of resources.
- Change in technology.
- Trade.
What causes productive inefficiency?
Productive inefficiency, with the economy operating below its production possibilities frontier, can occur because
the productive inputs physical capital and labor are underutilized
—that is, some capital or labor is left sitting idle—or because these inputs are allocated in inappropriate combinations to the different …
What is the opportunity cost of a decision?
Opportunity cost is
the value of what you lose when you choose from two or more alternatives
. It’s a core concept for both investing and life in general. When you invest, opportunity cost can be defined as the amount of money you might not earn by purchasing one asset instead of another.
