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Question

Allocative efficiency is concerned with

Multiple Choice

producing the combination of goods most desired by society.

achieving the full employment of all available resources.

producing every good with the least-cost combination of inputs.

reducing the concavity of the production possibilities curve.

Answer

producing the combination of goods most desired by society.

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Allocative efficiency refers to the optimal allocation of resources in order to produce the combination of goods and services that is most desired by society. It involves making choices about what goods and services to produce, in what quantities, and for whom. Allocative efficiency ensures that resources are allocated in a way that maximizes societal welfare and satisfaction. To achieve allocative efficiency, it is necessary to consider the preferences and demands of consumers. This means producing goods and services that are in high demand and have a greater value to society. Allocative efficiency requires a careful balance between the production of different goods and services, taking into account factors such as consumer preferences, market demand, and the availability of resources. Allocative efficiency is not solely concerned with achieving full employment of all available resources or producing goods with the least-cost combination of inputs. While these factors are important for overall economic efficiency, allocative efficiency specifically focuses on producing the goods and services that society values the most. It involves making choices that result in the greatest overall satisfaction and welfare for society as a whole. By achieving allocative efficiency, an economy can ensure that resources are not wasted on producing goods and services that are not in high demand or do not provide significant value to society. Instead, resources are directed towards the production of goods and services that are most desired, leading to a more efficient allocation of resources and a higher overall level of societal welfare.