Productive efficiency is achieved when
A)firms add a low profit margin to the goods and services they produce.
B)firms produce the goods and services that consumers value most.
C)firms produce goods and services at the lowest cost.
D)there are no shortages or surpluses in the market.

Question

Quizplus · Accepted Answer

Productive efficiency is achieved when firms produce goods and services at the lowest cost possible, which means that they are operating at the lowest point on the average total cost curve. This minimizes waste and allows firms to produce more output with the same amount of resources, leading to lower prices for consumers and higher profits for the firm. Adding a low profit margin (A) may be one method of achieving productive efficiency, but it is not the defining characteristic. Producing the goods and services that consumers value most (B) is an important aspect of allocative efficiency, but it does not necessarily ensure productive efficiency. The absence of shortages or surpluses in the market (D) is a characteristic of market equilibrium rather than productive efficiency.

Productive Efficiency Is Achieved When