# IGCSE Economics Paper-1: Specimen Questions with Answers 10 - 10 of 64

## Question 10

### Explanation

**Productive Efficiency:** Productive efficiency denotes the production possibility curve. It is the locus of all those combinations of two goods that a producer can manufacture with the full utilization of the available resources. The curve is also known as a transformative curve, a production frontier curve, a product substitution curve or an opportunity cost curve. As the producer moves from one point to another, he scarifies one unit of a commodity-Y to get one more unit of commodity-X. All points on the curve AB, i. e. C, D, and E denote the productive efficiency of a firm.

**Allocative Efficiency:**Allocative efficiency is concerned with that level of production where marginal cost of production is equal to price of a good. It is related to the distribution and allocation of resources.- When resources are allocated in an optimal manner and their marginal costs are equal to marginal utility. Point E shows allocative efficiency because at this point marginal utility is equal to marginal cost.