Question

The idea of efficiency often arises when measuring a society's well-being. There are two kinds of efficiency: productive efficiency and allocative efficiency.
What can the government do to promote allocative efficiency?
a. Impose a minimum of interference in the market, thus enabling the people who are willing to pay the most for a given good or service to obtain it.
b. Take responsibility for distributing resources equally among the rich and the poor, regardless of people's preferences.
c. Allocate all resources to maximize the production of the one product most desired by the society.
d. Allocate resources so that all types of goods and services are produced in the same amount.

Answer 1

Answer:

The correction option is A) Impose a minimum of interference in the market, thus enabling the people who are willing to pay the most for a given good or service to obtain it.

Explanation:

Minimum interference from the government ensures that only those goods are produced and sold which have a general demand in the market. For example, if there is a demand for 1000 tonnes of flour in a city, entrepreneurs will make sure to fulfill this demand.

In other words, the market forces of demand and supply will work freely.

All other options are wrong and are an example of socialism and communist economic policies that have time and again failed in Eastern Europe, Soviet Union and even China.

Governments are not efficient and the amount of red tape and bureaucracy always means that government involvement can either create shortages or surplus in the market.

In this case, shortages would mean people not have enough flour, or if there is a surplus, the price of flour will fall, having an impact on farmers.

Hence, it is better for the government to maintain a policy of minimum interference.