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.

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Q: 68 (CDS-I/2016)

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 :

question_subject: 

Economics

question_exam: 

CDS-I

stats: 

0,26,36,18,8,10,26

keywords: 

{'pareto efficiency': [0, 0, 0, 1], 'allocative efficiency': [0, 0, 0, 1], 'efficient economy': [0, 0, 0, 1], 'efficiency': [0, 0, 1, 0], 'pareto optimality': [0, 0, 0, 1], 'production possibility frontier': [0, 0, 0, 1], 'resource allocation': [0, 0, 0, 1], 'economy': [1, 3, 8, 35], 'production': [16, 4, 20, 51], 'mainstream economics': [0, 0, 0, 1]}

The correct answer is option 4.

Let`s break down each statement and understand why they are true or false.

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

This statement is true. In economic terms, efficiency refers to the allocation of resources in a way that maximizes overall well-being. If any reorganization of production could make someone better off without making someone else worse off, it means the initial allocation was not efficient.

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

This statement is false. The PPF represents the maximum output an economy can achieve with its given resources and technology. If an economy is inside the PPF, it means it is not utilizing its resources efficiently, but it does not necessarily imply that it is clearly inefficient. There could be factors such as unemployment or underutilization of resources causing the economy to operate below its potential.

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

This statement is true. An efficient economy is one that is operating at its maximum potential, utilizing all available resources. This means it would be on or along the PPF