00:02
For problem 21, we have a question that says, it is clear that productive inefficiency is a waste, since resources are used in a way that produces less goods and services than a nation is capable of.
00:18
Why is allocative inefficiency also wasteful? okay, so let's start with productive efficiency.
00:30
So productive efficiency refers to the optimal measurement.
00:35
Or the lowest cost of producing goods or services.
00:41
And allocative efficiency refers to the optimal distribution of goods and resources.
00:50
So here i have my production possibilities frontier and on my y -axis i have gold, the production of gold, and on my x -axis i have the production of diamonds.
01:03
So a protective efficiency occurs on the ppe.
01:07
So on this line right here, okay, on this line, that's where productive efficiency occurs.
01:18
Protective efficiency occurs on this line because it is impossible to produce more of one good, whether it is gold or diamonds, without sacrificing the production of another good, whether it's also gold or diamonds...