Which type of efficiency is represented by the points on the Production Possibilities Frontier?

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The question asks: Which type of efficiency is represented by the points on the Production Possibilities Frontier?

Option a: Social efficiency. This term is sometimes used in welfare economics to describe a state where the allocation maximizes overall social welfare, but the PPF specifically illustrates production trade-offs and efficiency in using resources, not social welfare per se. So this label does not match the standard interpretation of a PPF point.

Option b: Allocative efficiency. Allocative efficiency concerns producing the mix of goods that society values most, given preferences and costs. While related to the broader idea of efficiency in an economy, the PPF frontier itself demonstrates productive efficiency (the best possible output given resources) rather than the particular mix that maximizes welfare. Therefore this option confuses the two concepts.

Option c: Profitable efficiency. This term is not standard in the context of the PPF or welfare economics. It sounds like an applied/business notion about profit, which is not the technical framing of the PPF's representation of efficiency in production. Hence, this choice is not correct in the economic theory context.

Option d: Productive efficiency. When a point lies on the Production Possibilities Frontier, it means that resources are being used in the most efficient way to produce a given bundle of goods; you cannot produce more of one good without producing less of another. This is the textbook definition of productive efficiency, and it directly corresponds to what the PPF shows along its curved boundary.

In short, the PPF’s points are about how well resources are allocated to produce goods given trade-offs, with the defining feature on the frontier being productive efficiency, rather than the other proposed labels.

MUF0061 Economics Unit 1 - Semester 2, 2025 Revision Quiz - Efficiency of Perfect Competition and Monopoly (10 - 12 minutes)

Which type of efficiency is represented by the points on the Production Possibilities Frontier?

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