29 Oct 2021
Problem 44
Page 297
Section: PROBLEMS
Chapter 12: Environmental Protection and Negative Externalities
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29 Oct 2021
Introduction
The production possibility curve shows a tradeoff between the two commodities as they have scarce resources. The production possibilities frontier also includes two kinds of efficiency which are the productive efficiency and Allocative efficiency. Productive efficiency determines how it would be impossible to produce more of one good which is unlikely lead to a repercussion effects on decreasing the quantity which can eventually produce more of the another good.
Allocative efficiency refers to a particular mix of goods which can be produced which also has a specific choice with respect to the production possibilities frontier. It reflects how the allocation of the society requires most desires.
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