What is productive efficiency?
Q: What is productive efficiency?
A: Productive efficiency is a situation in which an economy is not able to produce any more of one good without reducing the production of another good because resources are limited.
Q: How can the concept of productive efficiency be shown?
A: The concept of productive efficiency can be shown on a production possibility frontier (PPF), where all points on the curve are productively efficient.
Q: What does productive efficiency refer to?
A: Productive efficiency refers to the maximum amount of output that an economy can produce at a certain point in time.
Q: Is it possible for the PPF to shift outwards?
A: Yes, if firms in the economy were to improve on their production methods and increase productivity, it is possible for the PPF to shift outwards, thus allowing more goods to be produced than before.
Q: What is productive inefficiency?
A: Productive inefficiency happens when factors of production (i.e. land, labor, capital or enterprise) are not used to its maximum.
Q: Can labor in the form of workers be productively inefficient?
A: Yes, if the worker were to be used to produce more output than before, then having the worker not doing any work would be productively inefficient.
Q: What is allocative efficiency?
A: Allocative efficiency is a special type of productive efficiency in which the right amount of goods is produced to benefit society in the best way.
