Which of the following statement s are true with respect to the concept of lsquo EFFICIENCY rs...........

Economic Affairs Introduction

Which of the following statement(s) are true with respect to the concept of ‘EFFICIENCY’ as used in mainstream economics?

1. Efficiency occurs when no possible reorganisation of production can make anyone better off without making someone else worse off

2. An economy is clearly inefficient if it is inside the Production Possibility Frontier (PPF)

3. At a minimum, an efficient economy is on its Production Possibility Frontier (PPF)

4. The terms such as ‘Pareto Efficiency’, “Pareto Optimality’ and ‘Allocative Efficiency’ are all essentially one and the same which denote ‘efficiency in resource allocation’

Select the correct answer using the code given below:

1 and 4 only

1 and 3 only

2 and 3 only

1, 2, 3 and 4

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Explanation:

2nd and 3rd statements are contradictory and both are incorrect.
A production possibility frontier (PPF) shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed. Opportunity Cost and the PPF. Reallocating scarce resources from one product to another involves an opportunity cost.