Urgent Help! (1 Viewer)

[StaceyK293920]

1. Allocative efficiency requires that no more of one good can be produced without sacrific of some of another good. TRUE or FALSE

2. Allocative effiency can be achieved inside an economy's production possibility frontier. TRUE or FALSE

3. For something to be an economic resource it must be useful in __________

4. What is the opportunity cost of a tertiary education degree course?

 

[veloc1ty]

1. My first thought was false, because it is possible to produce goods without sacrifice of another (a Pareto improvement) but it might be asking what happens once allocative efficiency is attained, and at that point net benefit is maximised and so a sacrifice is required to produce any more goods. In short, badly worded question.

2. True, I think. Any point inside the PPF is productively inefficient, but perhaps not allocatively efficient.

3. Production?

4. Many things... years lost in taking the degree, money paid to the uni, etc.

 

[gnrlies]

1 - What you are describing is pareto efficiency (i.e. you cannot make more of one good unless you sacrifice another). But this is not the only requirement in order to achieve allocative efficiency. All of the points on the production possibility frontier (ppf) will be pareto efficient. Allocative efficiency refers to the point where resources are allocated in a manner that maximises the benefit to society. This is where we now have to consider where along the PPF we are to produce. For example, there are three options along a PPF. I could produce zero banannas and 2 apples, zero apples and 2 banannas, or 1 apple and 1 bannana. Each point is pareto efficient (as I cannot produce another apple / bannana without sacrificing one of the other). With allocative efficiency we are concerned with allocating our resources in order to best satisfy our needs. So we have to consider which of the three options best satisfies our preferences. If we dislike bannanas we would produce 2 apples and 0 bannanas. Even though the other options are pareto efficient, they are not allocatively efficient as we would be allocating resources to produce goods that we dont want.

In short, in order to be allocatively efficient you also need to be pareto efficient (so the answer is true) but you also need to produce the right mix of goods that suits the preference of the economy.

2. As I said before, no point within the PPF is pareto efficient, therefore no point within the PPF is allocatively efficient

3. I would say EXCHANGE. In an economy we trade with other people. I.e. you give me a haircut and I will give you a footrub. We just tend to have a more formal and complex system. I.e. you give me a haircut and I will give you 10 dollars, and then you can give me 10 dollars to give you a footrub. The moral to the story is that something only has an economic worth if you can exchange it for something else. E.g. if you have prescription glasses this is unlikely to be an economic resource as you cannot exchange them.

4. the next best thing that you can do instead of tertiary studies (i.e. go out and work)