efficiency occurs when we produce goods and services at the

efficiency occurs when we produce goods and services at the lowest possible cost. efficiency occurs when the last unit of each good produced has a marginal cost equal to the marginal beneft. All points on the PPF are points ofefficiency When we produce at the point on the PPF that we prefer above all other points we achieveefficiency , a O B. Allocative; Production; production; allocative C. Production; Allocative, production; allocative D. Allocative: Production; allocative: production Click to select your answer

Solution

First question. It is productive efficiency when we are able to produce at lowest possible cost. It is allocative efficiency when the marginal cost is equated against marginal benefit. All the points on the PPF show production efficiency. Therefore options C is correct

Second question. Marginal benefit continues to decrease as one consumes more of a good because it follows the principle of diminishing marginal utility. Option B is correct.

Third question. When number of camel rides are 42, marginal benefit is less than the marginal cost because the former is 3 and the latter is 14. Therefore too many rides are being produced and hence the quantity of camel rides should be reduced. Option d is correct.

Fourth question. Production efficiency requires Brazil to be producing at PPF. For producing 40 barrels of Ethanol it must produce 3 tons of food crops. Option C is correct.