The choice on a production possibilities set that is socially preferred, or the choice on an individual’s budget constraint that is personally preferred, will display _____________________.

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The question asks about the property of a choice on a production possibilities set (PPF) that is socially preferred, or on an individual’s budget constraint that is personally preferred.

First, consider what allocative efficiency means: it occurs when resources are allocated in a way that maximizes total societal welfare, or when a consumer’s consumption bundle on the budget constraint provides them with the highest possible utility given prices and income. In both contexts, the focus is on the desirability or usefulness of the particular choice from the perspective of value or satisfaction.

Next, analyze the implied contrast in the prompt: among all feasible points on the PPF (or along the budget line), the one that is socially or personally preferred is the one that aligns with allocative efficiency. In the PPF framework, allocative efficiency occurs where the marginal rate of transformation (the slope of the PPF) equals the marginal rate of substitution (the consumer's personal valuation of goods), indicating an optimal mix of goods according to preferences and constraints. In simple terms, the chosen point represents the best possible allocation given preferences and resources.

Now, examine potential distractors conceptually (even though they aren’t listed here): other possibilities in some texts might include terms like productive efficiency, Pareto efficiency, or marginal analysis concepts. However, productive efficiency alone concerns producing on the PPF boundary (no wasteful production), not necessarily social preferences. Pareto efficiency is a broader concept that can align with allocative efficiency but is defined differently (no one can be made better off without making someone else worse off). The key emphasis in the question is on the value-laden aspect of the choice—how well it matches desires or welfare given constraints—which is the essence of allocative efficiency.

Finally, the prompt states that the answer is allocative efficiency, which fits the intended definition: the socially preferred point on the PPF or the personally preferred point on a budget constraint reflects the optimal allocation of resources given preferences and constraints, i.e., allocative efficiency.

ECON 203-0001 Chapter 2

The choice on a production possibilities set that is socially preferred, or the choice on an individual’s budget constraint that is personally preferred, will display _____________________.

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ECON 203-0001 Chapter 2

The choice on a production possibilities set that is socially preferred, or the choice on an individual’s budget constraint that is personally preferred, will display _____________________.

View Explanation

Log in for full answers

Similar Questions

The condition for allocative efficiency is violated when

The following questions refer to the monopoly graph below, where MC = marginal cost, ATC = average total cost, D = demand, and MR = marginal revenue. Which Q and P represents allocative efficiency?

Imperfectly competitive markets do not achieve allocative efficiency because profit maximization for each firm occurs when which of the following is true?

Production occurs up to that level of output at which price Blank ______ marginal cost, resulting in allocative efficiency under pure competition.

The allocatively efficient level of output is produced in any market structure when

The condition for allocative efficiency is

A situation in which an economy is using its resources to produce the best combination of goods and services to satisfy consumer desires is called

A monopolistically competitive industry does not display _______________ because ______________________.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

A monopolistically competitive industry does not display _ because ________.