Chapter 3, Problem 1MCQ

To determine

The question requires us to determine the productive efficiency point on the graph.

Explanation of Solution

If an economy produces at the points on the production possibility curve, the economy represents product efficiency. On the other hand, if the economy produces a mix of goods at the point along the production possibility curve that makes the consumers as better off as possible, the economy represents the allocation efficiency.

In the given case, the economy is producing at point A and D on the PPC at which only one product is produced then the economy is achieving product efficiency.

Therefore, option “b” is correct.