Responsible Allocation of Natural Resources in Environment
What is the most correct statement about allocation of resources?
A. Resource allocation must address scarcity by making trade-offs between productive and allocative efficiencies
B. Resource allocation does not need to consider scarcity
C. Resource allocation should only focus on productive efficiency
D. Resource allocation should solely consider allocative efficiency
Final answer: Resource allocation must address scarcity by making trade-offs between productive and allocative efficiencies, with market-oriented policies often offering greater flexibility to accommodate societal preferences.
Answer:
The most correct statement about allocation of resources is A. Resource allocation must address scarcity by making trade-offs between productive and allocative efficiencies.
The allocation of natural resources in the environment must consider both scarcity and responsible stewardship. Scarcity implies that resources are finite, and no society can produce everything it desires, requiring decisions about resource allocation to achieve the maximum benefit for society. These decisions involve trade-offs between productive efficiency, which is producing on the production possibility frontier (PPF), and allocative efficiency, which aligns with the preferences of society as expressed through its institutions.
Choices such as points on the PPF illustrate productive efficiency, meaning societies can produce more of one or both goods compared to choices inside the PPF. However, without considering societal preferences, one cannot determine if these choices are also allocatively efficient. Market-oriented policies are generally seen as more flexible in achieving productive efficiency and satisfaction of preferences compared to command-and-control policies.