Question

A situation in which a good is produced at the lowest possible cost is

a. Economic efficiency

b. Allocative efficiency

c. Productive efficiency

d. None of the above

Answer 1

Economic efficiency can be defined as a situation when all goods and factors of production in an economy are distributed or allocated in such a way so that waste of resources is minimized.

Since when output is produced according to the perfectly competitive firm, then production and allocative efficiency will be achieve.

Profit-maximizing condition are;

Price=MC=minimum of ATC.

The productive efficiency condition is

MC=ATC

Economic efficiency will be there when social surplus is maximized.

Hence it can be said that a situation in which a good is produced at the lowest possible cost is productive efficiency.

Hence option C is the correct answer.