Use the following to answer questions :
-(Table: Production of Good Z and Good X in Urbanville) Look at the table Production of Good Z and Good X in Urbanville. Suppose this table shows the production possibility frontier and Urbanville is producing 15 of Z and 45 of X. This combination is:
A)both allocatively and productively efficient.
B)productively efficient.
C)allocatively efficient.
D)neither productively nor allocatively efficient.

Question

Use the following to answer questions : 
-(Table: Production of Good Z and Good X in Urbanville) Look at the table Production of Good Z and Good X in Urbanville. Suppose this table shows the production possibility frontier and Urbanville is producing 15 of Z and 45 of X. This combination is:
A)both allocatively and productively efficient. 
B)productively efficient. 
C)allocatively efficient. 
D)neither productively nor allocatively efficient.

Quizplus · Accepted Answer

Since the table shows the production possibility frontier, any point on the curve represents a combination of production of Good Z and Good X that is productively efficient. Therefore, Urbanville producing 15 of Z and 45 of X is productively efficient. However, we cannot determine whether it is allocatively efficient without knowing the relative prices and values of the two goods.

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