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Q67 (CDS-I/2016) Economy › Basic Concepts & National Income › Opportunity cost Answer Verified

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 :

Result
Your answer: —  ·  Correct: D
Explanation

In mainstream economics, efficiency (specifically Pareto efficiency) occurs when resources are allocated such that no individual can be made better off without making another worse off [1]. This concept is intrinsically linked to the Production Possibility Frontier (PPF), which represents the maximum output combinations an economy can produce with given resources and technology [2]. Any point inside the PPF indicates that resources are underutilized or misallocated, signifying clear inefficiency. Conversely, an efficient economy must operate on the PPF boundary to maximize output from available inputs [2]. While technical nuances exist, in general introductory economics, 'Pareto Efficiency', 'Pareto Optimality', and 'Allocative Efficiency' are often used interchangeably to denote an optimal state where resource allocation maximizes social welfare and no further mutually beneficial trades or reallocations are possible . Thus, all four statements accurately reflect standard economic principles regarding efficiency.

Sources

  1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 3: Production and Costs > Chapter 3 > p. 37
  2. [2] Microeconomics (NCERT class XII 2025 ed.) > Chapter 1: Introduction > Production Possibility Frontier > p. 3
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