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In a competitive market, all of the choices along the production possibility frontier display (-----) efficiency, while the specific choice on the frontier that society picks in the one with (-----) efficiency.

a. Productive; Allocative
b. Allocative; Productive
c. Allocative; Allocative
d. Productive; Productive

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Answer:

a. Productive; Allocative

Explanation:

At full production capacity, all of the choices (no matter the trade-off) are productive by all means. However, the choice of a particular economy regarding the pinpoint on the production possibility frontier is representing allocative efficiency. One of the crucial tasks of economics is to efficiently allocate the resources in order to achieve full production capacity.

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