a. Productive Efficiency. For example, if a company produces yo-yos and boomerangs, increasing production time on the yo-yos may mean curtailing the production of boomerangs. Refer to the diagram. For example, if a company produces yo-yos and boomerangs, increasing production time on the yo-yos may mean curtailing the production of boomerangs. Productive efficiency Each good in the optimum combination must be produced at the lowest possible costs. It can be extended by improving production via technological advances or innovative production methods. Productive Efficiency This type of economic efficiency is achieved when the least resources are used by a producer to manufacture services or products relative to others. Examples of Productive Efficiency in the following topics: Productive Efficiency. This frontier is not immovable, however, for either entire economies or the companies within them. In microeconomics, economic efficiency is used about production. This preview shows page 2 - 4 out of 5 pages. answered Jul 8, 2016 by Icould. Productive efficiency when resources are used to give the maximum possible output at the lowest possible cost. Productive efficiency represents a way of understanding the relationship between the resources an economy has and the way that it uses them. Productive Efficiency. Allocative efficiency is again about efficiency, but it's also about using capital and resources to make different types of goods. ". Transcribed Image Text from this Question (6) Q#5 Differentiate a) Allocative efficiency and Productive efficiency b) Increasing and decreasing Cost Industries c) Aspiration level of output and profit maximizing level of output b. Productive efficiency and allocative efficiency are two concepts achieved in the long run in a perfectly competitive market. Allocative efficiency is achieved when the production. What I've understood is that productive efficiency can only take place on one part of the PPF curve. We’ve already discussed how the Lantek system dramatically reduces raw material consumption as well as the necessary man … This is possible by taking advantage of the efficient production system, cheap labor, minimum waste, or by utilizing the economies of scale . When determining allocative efficiency, a person must assess how the goods created are benefiting society, as opposed to just measuring the sheer amount of goods. If a company wants to make more of one good, it has to make less of a different good. Productive efficiency is achieved when output is produced at minimum cost. b. An equilibrium may be productively efficient without being allocatively efficient. The ability to use these resources in the most efficient way possible is crucial to the success of any business, and how an economy gets the most out of its resources will also have an effect on society in terms of available goods and price levels. where marginal costs equal average costs). The study of economics does not presume to tell a society what choice it should make along its production possibilities frontier. Total productive efficiency is achieved when both technical efficiency and allocative efficiency are achieved. 188. Productive efficiency is reached when a company produces at the minimum cost, a situation that is achieved under perfect competition (McEachern, 2011). Allocative efficiency means that resources are used for producing the combination of goods and services most wanted by society. Economic study often focuses on the way corporations, companies, or even economies as a whole utilize the resources they have at their disposal. Productive efficiency involves producing goods or services at the lowest possible cost. B. P = MC. This means that it is not possible to produce more of any one good without producing less of another. An economy achieves "productive efficiency" only when _____. But there's a difference between being productive and being efficient, and efficiency wins every time. Productive efficiency is the condition that exists when production uses the least cost combination of inputs. Productive efficiency and short-run average cost curve. For example, a monopolistic economy, in which one company controls all of the production of a certain product, would likely be inefficient. answered Jul 8, 2016 by Icould. Allocative efficiency Allocative efficiency is the concept of producing goods and service using least possible scare resources that are most wanted or desired by consumers. The goal is to use the same input to produce more goods, but sometimes that's not possible. This concept of economic efficiency is relevant only when the quality of manufactured goods remains unchanged. Allocative efficiency occurs when the marginal cost of producing a good is equal to the price of the good i.e. b. If an economy can only conceivably produce a certain number of goods with a certain amount of input, that represents the production possibility frontier. Productive efficiency occurs when production of a good is achieved at the lowest resource cost possible, given the level of production of other goods. Allocative efficiency is achieved when the production of a good occurs where: A. P = minimum ATC. In a market-oriented economy with a democratic government, the choice will involve a mixture of decisions by individuals, firms, and government. A more competitive society would likely lead to more efficient production. So the efficiency is being allocated to different goods in a market. answered Jul 8, 2016 by 123BDA . Allocative efficiency is based on the amount of production, while productive efficiency is based on the method of production. Efficiency. Productive efficiency: Production is efficient if it is not possible to make any more of one output good without making less of som e other output good. 72) Productive efficiency is achieved when firms produce goods and services A) most desired by society. The producer might achieve this by exploiting economies of scale or by having the advantage of the most efficient production technology, the cheapest labor or minimal production waste. By nature, using the lowest input will also create the lowest cost of production for an economy. A firm is said to be productively efficient when it is producing at the lowest point on the short run average cost curve (this is the point where marginal cost meets average cost). C. total number of goods produced is greatest. b. Productive efficiency occurs where price is equal to minimum average total cost (min ATC); at this point firms must use the lease-cost technology or they won’t survive. Productive efficiency is achieved if and only if the firm is producing at the point where AC = MC. A productively efficient economy always produces on its production possibility frontier. (noun) In the long run, it is the minimum average cost. This concept can be compared to allocative efficiency, which is a measurement of how the goods created affect society as a whole. Productive efficiency is achieved when an economy creates the most possible goods through the least possible input, thus maximizing the efficiency of operations. The producer might achieve this by exploiting economies of scale or by having the advantage of the most efficient production technology, the cheapest labor or minimal production waste. An inefficient organization operates with long delays and high costs, while an efficient organization is focused, meets deadlines, and performs within budget. 2. B) at the highest profit margin. Total productive efficiency is achieved when both technical efficiency and allocative efficiency are achieved. Total productive efficiency is achieved when both technical efficiency and allocative efficiency are achieved. C. P = minimum AVC. Productive efficiency is achieved when a producer uses the least amount of resources to produce goods or services relative to others. "Allocative efficiency" is achieved when the production of a good occurs where: Page 2. If you produce unwanted amounts of goods in a highly efficient manner, you have achieved high productive efficiency, but low allocative efficiency. In terms of productive efficiency, the goal is to create as much as possible by using as little as possible. Analysts use production efficiency to determine if the economy is performing optimally, without any resources going into waste. More output is produced using more inputs. For example, if the government allocated 90% of the Gross Domestic Product (GDP) to the production of guns, it will have achieved high productive efficiency but low allocative efficiency since the economy will be unbalanced. 21) Productive efficiency is achieved when A) firms add a low profit margin to the goods and services they produce. Our instructor explained productive efficiency on the production possibility frontier (PPF) diagram and I had a hard time understanding it. Productive efficiency is achieved when a producer uses the least amount of resources to produce goods or services relative to others. Allocative efficiency is achieved when the production of a good occurs where from AP MICRO ECON 101 at Klein Oak H S Goods created affect society as a whole a ) most desired by society types... Noted, content and user contributions on this site are licensed under CC 4.0. 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